Bloom, Nicholas
[Author]
;
Saporta-Eksten, Itay
[Other];
Floetotto, Max
[Other];
Jaimovich, Nir
[Other];
Terry, Stephen J.
[Other]National Bureau of Economic Research
imprint:
Cambridge, Mass: National Bureau of Economic Research, July 2012
Published in:NBER working paper series ; no. w18245
Extent:
1 Online-Ressource
Language:
English
DOI:
10.3386/w18245
Identifier:
Reproduction note:
Hardcopy version available to institutional subscribers
Origination:
Footnote:
Mode of access: World Wide Web
System requirements: Adobe [Acrobat] Reader required for PDF files
Description:
We propose uncertainty shocks as a new shock that drives business cycles. First, we demonstrate that microeconomic uncertainty is robustly countercyclical, rising sharply during recessions, particularly during the Great Recession of 2007-2009. Second, we quantify the impact of time-varying uncertainty on the economy in a dynamic stochastic general equilibrium model with heterogeneous firms. We find that reasonably calibrated uncertainty shocks can explain drops and rebounds in GDP of around 3%. Moreover, we show that increased uncertainty alters the relative impact of government policies, making them initially less effective and then subsequently more effective