ECIN Replication Package for "How certain are we about the role of uncertainty in the economy?"

Name: ECIN Replication Package for "How certain are we about the role of uncertainty in the economy?"
Published: 2023-04-07
License: https://creativecommons.org/licenses/by/4.0

Principal Investigator(s): View help for Principal Investigator(s) Helmut Herwartz, University of Goettingen; Alexander Lange, University of Goettingen

Version: View help for Version V2

Name	File Type	Size	Last Modified
readme.pdf	application/pdf	97.4 KB	05/14/2023 06:21:AM
replication_files_ECIN_2022_303.zip	application/zip	953.9 MB	05/17/2023 08:14:AM

Project Citation:

Herwartz, Helmut, and Lange, Alexander. ECIN Replication Package for “How certain are we about the role of uncertainty in the economy?” Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2023-05-29. https://doi.org/10.3886/E188341V2

Project Description

Summary: Although the causes and consequences of uncertainty in the US economy have attracted a strong research interest over the past decade, the literature still lacks a consensus on several aspects. To name two matters of debate, it remains unclear whether uncertainty shocks are a source or the result of recessions and whether uncertainty shocks have adverse (or even stimulating) effects on the economy. We find that ambiguous results in these regards can be traced back to the selection of an appropriate identification strategy in structural vector autoregressive (SVAR) models. As a potential solution, we propose an easy-to-employ and agnostic identification approach that utilizes tools of independent component analysis (ICA). In addition, ICA-based identification allows straightforward model augmentation as an elegant means to reconsider the results of some prominent studies that point to realized volatility as the actual trigger of economic slowdowns rather than uncertainty shocks. Overall, we find that both macroeconomic and financial uncertainty are exogenous to business cycle fluctuations and cause economic slowdowns. Moreover, our results show that realized volatility is the result of economic and financial turbulence, not the cause.

Funding Sources: Deutsche Forschungsgemeinschaft (Germany) (HE 2188/8-2)

Scope of Project

Subject Terms: economic uncertainty; structural models

JEL Classification:
      C32 Multiple or Simultaneous Equation Models: Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
      E32 Business Fluctuations; Cycles
      E44 Financial Markets and the Macroeconomy
      G01 Financial Crises

Manuscript Number: ECIN 2022 303

Geographic Coverage: USA

Data Type(s): program source code

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Published Versions

V2 [2023-05-29]

V1 [2023-04-07]

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