Uncertainty and monetary policy in good and bad times: A Replication of the VAR investigation by Bloom (2009)

This paper revisits the well-known VAR evidence on the real effects of uncertainty shocks by Bloom (Econometrica 2009(3): 623-685. doi: 10.3982/ECTA6248). We replicate the results in a narrow sense using Eviews. In a wide sense, we extend his study by working with a smooth transition-VAR framework that allows for business cycle-dependent macroeconomic responses to an uncertainty shock. We find a significantly stronger response of real activity in recessions. Counterfactual simulations point to a greater effectiveness of systematic monetary policy in stabilizing real activity in expansions.

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  1. Alan J. Auerbach & Yuriy Gorodnichenko, 2012. " Measuring the Output Responses to Fiscal Policy ," American Economic Journal: Economic Policy, American Economic Association, vol. 4(2), pages 1-27, May.

Citations

  1. Caggiano, Giovanni & Castelnuovo, Efrem & Pellegrino, Giovanni, 2021. " Uncertainty shocks and the great recession: Nonlinearities matter ," Economics Letters, Elsevier, vol. 198(C).
  2. Haque, Qazi & Magnusson, Leandro M., 2021. " Uncertainty shocks and inflation dynamics in the U.S ," Economics Letters, Elsevier, vol. 202(C).

Most related items

  1. Giovanni Caggiano & Efrem Castelnuovo & Gabriela Nodari, 2022. " Uncertainty and monetary policy in good and bad times: A replication of the vector autoregressive investigation by Bloom (2009) ," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 37(1), pages 210-217, January.
  2. Giovanni Caggiano & Efrem Castelnuovo & Gabriela Nodari, 2014. " Uncertainty and Monetary Policy in Good and Bad Times ," "Marco Fanno" Working Papers 0188, Dipartimento di Scienze Economiche "Marco Fanno".

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