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News and Uncertainty Shocks

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  • Cascaldi-Garcia, Danilo

    (Warwick Business School, University of Warwick)

  • Galvao, Ana Beatriz

    (Warwick Business School, University of Warwick)

Abstract

We provide novel empirical evidence linking the effects of technology news shocks with uncertainty shocks. The correlation between news and financial uncertainty shocks implies that when financial uncertainty shocks hit the economy, utilization-adjusted total factor productivity increases over the medium term. This leads to an attenuation of the negative impact of increasing uncertainty on economic activity. The correlation also implies that the positive effects of technology news shocks on output, consumption, investment and hours are attenuated over the short term. Supported by these empirical results, we propose an identification strategy to obtain the impact of `good uncertainty' shocks and disentangle the importance of technological news, good and bad uncertainties, and ambiguity shocks in explaining business cycle variation.

Suggested Citation

  • Cascaldi-Garcia, Danilo & Galvao, Ana Beatriz, 2016. "News and Uncertainty Shocks," EMF Research Papers 12, Economic Modelling and Forecasting Group.
  • Handle: RePEc:wrk:wrkemf:12
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    3. Danilo Cascaldi-Garcia & Marija Vukotic, 2022. "Patent-Based News Shocks," The Review of Economics and Statistics, MIT Press, vol. 104(1), pages 51-66, March.
    4. Görtz, Christoph & Yeromonahos, Mallory, 2022. "Asymmetries in risk premia, macroeconomic uncertainty and business cycles," Journal of Economic Dynamics and Control, Elsevier, vol. 137(C).
    5. Ahmed, Rashad, 2020. "Global Flight-to-Safety Shocks," MPRA Paper 103501, University Library of Munich, Germany.
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    7. Danilo Cascaldi-Garcia, 2017. "Amplification effects of news shocks through uncertainty," 2017 Papers pca1251, Job Market Papers.
    8. Danilo Cascaldi-Garcia, 2022. "Forecast Revisions as Instruments for News Shocks," International Finance Discussion Papers 1341, Board of Governors of the Federal Reserve System (U.S.).
    9. Redl, Chris, 2020. "Uncertainty matters: Evidence from close elections," Journal of International Economics, Elsevier, vol. 124(C).
    10. Laurent Ferrara & Stéphane Lhuissier & Fabien Tripier, 2018. "Uncertainty Fluctuations: Measures, Effects and Macroeconomic Policy Challenges," Financial and Monetary Policy Studies, in: Laurent Ferrara & Ignacio Hernando & Daniela Marconi (ed.), International Macroeconomics in the Wake of the Global Financial Crisis, pages 159-181, Springer.
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    13. Tosapol Apaitan & Pongsak Luangaram & Pym Manopimoke, 2020. "Uncertainty and Economic Activity: Does it Matter for Thailand?," PIER Discussion Papers 130, Puey Ungphakorn Institute for Economic Research.
    14. Gu, Xin & Zhu, Zixiang & Yu, Minli, 2021. "The macro effects of GPR and EPU indexes over the global oil market—Are the two types of uncertainty shock alike?," Energy Economics, Elsevier, vol. 100(C).
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    More about this item

    Keywords

    forecasting error variance ; structural VAR ; news shocks ; uncertainty shocks JEL Classification Numbers: C32 ; E32;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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