IDEAS home Printed from
MyIDEAS: Login to save this paper or follow this series

Fluctuations In Uncertainty

  • Nicholas Bloom

This review article tries to answer four questions: (i) what are the stylized facts about uncertainty over time; (ii) why does uncertainty vary; (iii) do fluctuations in uncertainty matter; and (iv) did higher uncertainty worsen the Great Recession of 2007-2009? On the first question both macro and micro uncertainty appears to rise sharply in recessions. On the second question the types of exogenous shocks like wars, financial panics and oil price jumps that cause recessions appear to directly increase uncertainty, and uncertainty also appears to endogenously rise further during recessions. On the third question, the evidence suggests uncertainty is damaging for short-run investment and hiring, but there is some evidence it may stimulate longer-run innovation. Finally, in terms of the Great Recession, the large jump in uncertainty in 2008 potentially accounted for about one third of the drop in GDP.

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL:
File Function: First version, 2014
Download Restriction: no

Paper provided by Center for Economic Studies, U.S. Census Bureau in its series Working Papers with number 14-17.

in new window

Length: 29 pages
Date of creation: Mar 2014
Date of revision:
Handle: RePEc:cen:wpaper:14-17
Contact details of provider: Postal: 4600 Silver Hill Road, Washington, DC 20233
Phone: (301) 763-6460
Fax: (301) 763-5935
Web page:

More information through EDIRC

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

as in new window
  1. Michelle Alexopoulos & Jon Cohen, 2009. "Uncertain Times, uncertain measures," Working Papers tecipa-352, University of Toronto, Department of Economics.
  2. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  3. Cosmin Ilut & Martin Schneider, 2012. "Ambiguous Business Cycles," Working Papers 12-06, Duke University, Department of Economics.
  4. Nicholas Bloom & Max Floetotto & Nir Jaimovich & Itay Saporta-Eksten & Stephen J. Terry, 2012. "Really Uncertain Business Cycles," NBER Working Papers 18245, National Bureau of Economic Research, Inc.
  5. Eberly, Janice C, 1994. "Adjustment of Consumers' Durables Stocks: Evidence from Automobile Purchases," Journal of Political Economy, University of Chicago Press, vol. 102(3), pages 403-36, June.
  6. Nick Bloom & John Van Reenen & Stephen Bond, 2006. "Uncertainty and Investment Dynamics," NBER Working Papers 12383, National Bureau of Economic Research, Inc.
  7. Fernández-Villaverde, Jesús & Guerron-Quintana, Pablo A. & Kuester, Keith & Rubio-Ramírez, Juan Francisco, 2011. "Fiscal Volatility Shocks and Economic Activity," CEPR Discussion Papers 8528, C.E.P.R. Discussion Papers.
  8. Ulrike Malmendier & Geoffrey Tate, 2004. "CEO Overconfidence and Corporate Investment," NBER Working Papers 10807, National Bureau of Economic Research, Inc.
  9. James H. Stock & Mark W. Watson, 2003. "Has the Business Cycle Changed and Why?," NBER Chapters, in: NBER Macroeconomics Annual 2002, Volume 17, pages 159-230 National Bureau of Economic Research, Inc.
  10. Matthias Kehrig, 2011. "The Cyclicality of Productivity Dispersion," 2011 Meeting Papers 484, Society for Economic Dynamics.
  11. Sylvain Leduc & Zheng Liu, 2012. "Uncertainty shocks are aggregate demand shocks," Working Paper Series 2012-10, Federal Reserve Bank of San Francisco.
  12. Jesus Fernandez-Villaverde & Pablo Guerron-Quintana & Juan F. Rubio-Ramirez & Martin Uribe, 2011. "Risk Matters: The Real Effects of Volatility Shocks," American Economic Review, American Economic Association, vol. 101(6), pages 2530-61, October.
  13. Erik Hurst & Christopher Foote & John Leahy, 2000. "Testing the (S, s) Model," American Economic Review, American Economic Association, vol. 90(2), pages 116-119, May.
  14. Robert G. Valletta & Leila Bengali, 2013. "What’s behind the increase in part-time work?," FRBSF Economic Letter, Federal Reserve Bank of San Francisco, issue aug26.
  15. Holger Kraft & Eduardo S. Schwartz & Farina Weiss, 2013. "Growth Options and Firm Valuation," NBER Working Papers 18836, National Bureau of Economic Research, Inc.
  16. Abel, Andrew B, 1983. "Optimal Investment under Uncertainty," American Economic Review, American Economic Association, vol. 73(1), pages 228-33, March.
  17. Bundick, Brent & Basu, Susanto, 2014. "Uncertainty shocks in a model of effective demand," Research Working Paper RWP 14-15, Federal Reserve Bank of Kansas City.
  18. Brennan, Michael J & Schwartz, Eduardo S, 1985. "Evaluating Natural Resource Investments," The Journal of Business, University of Chicago Press, vol. 58(2), pages 135-57, April.
  19. Bachmann, Rüdiger & Bayer, Christian, 2013. "‘Wait-and-See’ business cycles?," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 704-719.
  20. Fatih Guvenen & Serdar Ozkan & Jae Song, 2014. "The Nature of Countercyclical Income Risk," Journal of Political Economy, University of Chicago Press, vol. 122(3), pages 621 - 660.
  21. John V. Leahy & Toni M. Whited, 1995. "The Effect of Uncertainty on Investment: Some Stylized Facts," NBER Working Papers 4986, National Bureau of Economic Research, Inc.
  22. Dennis Novy & Alan M. Taylor, 2014. "Trade and uncertainty," LSE Research Online Documents on Economics 60280, London School of Economics and Political Science, LSE Library.
  23. Giuseppe Bertola & Luigi Guiso & Luigi Pistaferri, 2005. "Uncertainty and Consumer Durables Adjustment," Review of Economic Studies, Oxford University Press, vol. 72(4), pages 973-1007.
  24. Lubos Pastor & Pietro Veronesi, 2011. "Political Uncertainty and Risk Premia," Working Papers 2011-007, Becker Friedman Institute for Research In Economics.
  25. Pablo N D’Erasmo & Hernan J Moscoso-Boedo, 2011. "Intangibles and Endogenous Firm Volatility over the Business Cycle," Virginia Economics Online Papers 400, University of Virginia, Department of Economics.
  26. Eric R. Sims, 2012. "Uncertainty and Economic Activity: Evidence from Business Survey Data," Working Papers 014, University of Notre Dame, Department of Economics, revised Jun 2012.
  27. Joseph Vavra, 2011. "Inflation Dynamics and Time-Varying Uncertainty: New Evidence and an Ss Interpretation," 2011 Meeting Papers 126, Society for Economic Dynamics.
  28. King, Robert G. & Rebelo, Sergio T., 1999. "Resuscitating real business cycles," Handbook of Macroeconomics, in: J. B. Taylor & M. Woodford (ed.), Handbook of Macroeconomics, edition 1, volume 1, chapter 14, pages 927-1007 Elsevier.
  29. repec:oup:qjecon:v:114:y:1999:i:1:p:185-227 is not listed on IDEAS
  30. repec:oup:qjecon:v:103:y:1988:i:3:p:479-508 is not listed on IDEAS
  31. Scott R. Baker & Nicholas Bloom, 2013. "Does Uncertainty Reduce Growth? Using Disasters as Natural Experiments," CEP Discussion Papers dp1243, Centre for Economic Performance, LSE.
  32. Valerie A. Ramey & Matthew D. Shapiro, 2001. "Displaced Capital: A Study of Aerospace Plant Closings," Journal of Political Economy, University of Chicago Press, vol. 109(5), pages 958-992, October.
  33. Garey Ramey & Valerie A. Ramey, 1994. "Cross-Country Evidence on the Link Between Volatility and Growth," NBER Working Papers 4959, National Bureau of Economic Research, Inc.
  34. Malkiel, Burton & Campbell, John & Lettau, Martin & Xu, Yexiao, 2001. "Have Individual Stocks Become More Volatile? An Empirical Exploration of Idiosyncratic Risk," Scholarly Articles 3128707, Harvard University Department of Economics.
  35. Ravi Bansal & Amir Yaron, 2004. "Risks for the Long Run: A Potential Resolution of Asset Pricing Puzzles," Journal of Finance, American Finance Association, vol. 59(4), pages 1481-1509, 08.
  36. Kyle Handley & Nuno Limão, 2012. "Trade and Investment under Policy Uncertainty: Theory and Firm Evidence," NBER Working Papers 17790, National Bureau of Economic Research, Inc.
  37. Chiara Scotti, 2013. "Surprise and uncertainty indexes: real-time aggregation of real-activity macro surprises," International Finance Discussion Papers 1093, Board of Governors of the Federal Reserve System (U.S.).
  38. Mathieu Taschereau-Dumouchel & Edouard Schaal & Pablo Fajgelbaum, 2013. "Uncertainty Traps," 2013 Meeting Papers 677, Society for Economic Dynamics.
  39. Stephen Davis & John Haltiwanger & Ron Jarmin & Javier Miranda, 2006. "Volatility and Dispersion in Business Growth Rates: Publicly Traded Versus Privately Held Firms," Working Papers 06-17, Center for Economic Studies, U.S. Census Bureau.
  40. Russell W. Cooper & John C. Haltiwanger, 2000. "On the Nature of Capital Adjustment Costs," NBER Working Papers 7925, National Bureau of Economic Research, Inc.
  41. Schwert, G William, 1989. " Why Does Stock Market Volatility Change over Time?," Journal of Finance, American Finance Association, vol. 44(5), pages 1115-53, December.
  42. Van Nieuwerburgh, Stijn & Veldkamp, Laura, 2006. "Learning asymmetries in real business cycles," Journal of Monetary Economics, Elsevier, vol. 53(4), pages 753-772, May.
  43. Kydland, Finn E & Prescott, Edward C, 1982. "Time to Build and Aggregate Fluctuations," Econometrica, Econometric Society, vol. 50(6), pages 1345-70, November.
  44. Ruediger Bachmann & Giuseppe Moscarini, 2011. "Business Cycles and Endogenous Uncertainty," 2011 Meeting Papers 36, Society for Economic Dynamics.
  45. Kraft, Holger & Schwartz, Eduardo & Weiss, Farina, 2013. "Growth options and firm valuation," SAFE Working Paper Series 6, Research Center SAFE - Sustainable Architecture for Finance in Europe, Goethe University Frankfurt.
  46. repec:oup:qjecon:v:101:y:1986:i:4:p:707-27 is not listed on IDEAS
  47. Hartman, Richard, 1972. "The effects of price and cost uncertainty on investment," Journal of Economic Theory, Elsevier, vol. 5(2), pages 258-266, October.
  48. repec:oup:restud:v:66:y:1999:i:4:p:873-907 is not listed on IDEAS
  49. Kjetil Storesletten & Chris I. Telmer & Amir Yaron, 2004. "Cyclical Dynamics in Idiosyncratic Labor Market Risk," Journal of Political Economy, University of Chicago Press, vol. 112(3), pages 695-717, June.
  50. repec:oup:qjecon:v:122:y:2007:i:1:p:243-287 is not listed on IDEAS
  51. repec:oup:qjecon:v:98:y:1983:i:1:p:85-106 is not listed on IDEAS
  52. repec:oup:restud:v:63:y:1996:i:4:p:581-93 is not listed on IDEAS
  53. repec:oup:qjecon:v:105:y:1990:i:3:p:597-624 is not listed on IDEAS
  54. Kyle Jurado & Sydney C. Ludvigson & Serena Ng, 2015. "Measuring Uncertainty," American Economic Review, American Economic Association, vol. 105(3), pages 1177-1216, March.
  55. Avinash K. Dixit & Robert S. Pindyck, 1994. "Investment under Uncertainty," Economics Books, Princeton University Press, edition 1, volume 1, number 5474.
  56. Bar-Ilan, Avner & Strange, William C, 1996. "Investment Lags," American Economic Review, American Economic Association, vol. 86(3), pages 610-22, June.
Full references (including those not matched with items on IDEAS)

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

When requesting a correction, please mention this item's handle: RePEc:cen:wpaper:14-17. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Fariha Kamal)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.