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Uncertainty and the Macroeconomy

Author

Listed:
  • Amélie Charles

    () (Audencia Business School)

  • Olivier Darné

    (LEMNA - Laboratoire d'économie et de management de Nantes Atlantique - IEMN-IAE Nantes - Institut d'Économie et de Management de Nantes - Institut d'Administration des Entreprises - Nantes - UN - Université de Nantes - IUML - FR 3473 Institut universitaire Mer et Littoral - UBS - Université de Bretagne Sud - UM - Le Mans Université - UA - Université d'Angers - CNRS - Centre National de la Recherche Scientifique - IFREMER - Institut Français de Recherche pour l'Exploitation de la Mer - UN - Université de Nantes - ECN - École Centrale de Nantes)

  • Fabien Tripier

    () (EPEE - Centre d'Etudes des Politiques Economiques - UEVE - Université d'Évry-Val-d'Essonne, CEPII - Centre d'Etudes Prospectives et d'Informations Internationales - Centre d'analyse stratégique)

Abstract

This article proposes a uncertainty composite indicator (UCI) based on three distinct sources of uncertainty (namely financial, political, and macroeconomic) for the US economy on the period 1985–2015. For that, we use a dynamic factor model, summarizing efficiently six individual uncertainty proxies, namely two macroeconomic and financial uncertainty factors based on the unpredictability, a measure of (micro)economic uncertainty, the implied volatility index, the corporate bond spreads, and an index of economic policy uncertainty. We then compare the effects of uncertainty on economic activity when the UCI is used instead of individual uncertainty proxies in structural VAR models. The interest of our UCI is to synthesize theses effects within one measure of uncertainty. Overall, the UCI was able to account for the most important dynamics of uncertainty which play an important role in business cycles.

Suggested Citation

  • Amélie Charles & Olivier Darné & Fabien Tripier, 2017. "Uncertainty and the Macroeconomy," Post-Print hal-01549625, HAL.
  • Handle: RePEc:hal:journl:hal-01549625
    DOI: 10.1080/00036846.2017.1349294
    Note: View the original document on HAL open archive server: https://hal-audencia.archives-ouvertes.fr/hal-01549625
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    References listed on IDEAS

    as
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    Cited by:

    1. Laurent Ferrara & Stéphane Lhuissier & Fabien Tripier, 2017. "Uncertainty Fluctuations: Measures, Effects and Macroeconomic Policy Challenges," CEPII Policy Brief 2017-20, CEPII research center.
    2. Bouoiyour, Jamal & Selmi, Refk & Wohar, Mark E., 2018. "Measuring the response of gold prices to uncertainty: An analysis beyond the mean," Economic Modelling, Elsevier, vol. 75(C), pages 105-116.

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    Keywords

    Dynamic factor model; Economic activity; Uncertainty;
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