Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response?†

Sydney C. Ludvigson, Sai Ma, Serena Ng

    Research output: Contribution to journalArticlepeer-review


    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.

    Original languageEnglish (US)
    Pages (from-to)369-410
    Number of pages42
    JournalAmerican Economic Journal: Macroeconomics
    Issue number4
    StatePublished - 2021

    ASJC Scopus subject areas

    • General Economics, Econometrics and Finance


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