TY - JOUR
T1 - Uncertainty and Business Cycles
T2 - Exogenous Impulse or Endogenous Response?†
AU - Ludvigson, Sydney C.
AU - Ma, Sai
AU - Ng, Serena
N1 - Funding Information:
* Ludvigson: Department of Economics, New York University, and NBER (email: sydney.ludvigson@nyu. edu); Ma: Federal Reserve Board of Governors (email: sai.ma@frb.gov); Ng: Department of Economics, Columbia University, and NBER (email: serena.ng@columbia.edu). Giorgio Primiceri was coeditor for this article. Ludvigson acknowledges financial support from the C.V. Starr Center for Applied Economics at NYU. Ng acknowledges support from the National Science Foundation under grants SES-0962431 and SES-1558623. We thank seminar participants at the 2016 ME, EFFE, and EF&G group meetings at the NBER, the CEPR-DRG-SAFE Conference on Banking, Monetary Policy, and Macroeconomic Performance in Frankfurt May 2016, the New Developments in Business Cycle Analysis conference in Rome June 2016, the 2016 Econometric Society meetings, the Joint Central Bankers Conference November 2017, the T2M Macro conference in Paris March 2018, the FRBNY and BOG Developments in Empirical Macroeconomics Conference May 10-11, 2018, WEAI 2019, Collegio Carlo Alberto, the Federal Reserve Board, the Federal Reserve Bank of Philadelphia, HEC Montreal, Johns Hopkins Carey School, MIT Sloan, NYU, SSE Swedish House of Finance, the University of Zurich/Swiss Finance Institute, UC Davis, UNC Kenan-Flagler, Washington University in St. Louis, and Yale for helpful comments. We are grateful to Ian Dew-Becker, Laurent Ferrara, John Leahy, Kurt Lunsford, Jóse Luis Montiel Olea, Mikkel Plagborg-Møller, Giorgio Primiceri, Jim Stock, and Stephen Terry for many valuable discussions. The views expressed are those of the authors and do not necessarily reflect those of the Federal Reserve Board or the Federal Reserve System.
Publisher Copyright:
© 2021. All Rights Reserved.
PY - 2021
Y1 - 2021
N2 - Uncertainty about the future rises in recessions. But is uncertainty a source of business cycles or an endogenous response to them, and does the type of uncertainty matter? We propose a novel SVAR identification strategy to address these questions via inequality constraints on the structural shocks. We find that sharply higher macroeconomic uncertainty in recessions is often an endogenous response to output shocks, while uncertainty about financial markets is a likely source of output fluctuations. (JEL D81, E23, E32, E44, G14)
AB - Uncertainty about the future rises in recessions. But is uncertainty a source of business cycles or an endogenous response to them, and does the type of uncertainty matter? We propose a novel SVAR identification strategy to address these questions via inequality constraints on the structural shocks. We find that sharply higher macroeconomic uncertainty in recessions is often an endogenous response to output shocks, while uncertainty about financial markets is a likely source of output fluctuations. (JEL D81, E23, E32, E44, G14)
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U2 - 10.1257/mac.20190171
DO - 10.1257/mac.20190171
M3 - Article
AN - SCOPUS:85118605987
VL - 13
SP - 369
EP - 410
JO - American Economic Journal: Macroeconomics
JF - American Economic Journal: Macroeconomics
SN - 1945-7707
IS - 4
ER -