Uncertainty Shocks and Unemployment Dynamics in U.S. Recessions
60 Pages Posted: 16 May 2014
Date Written: May 2014
Abstract
We investigate the effects of uncertainty shocks on unemployment dynamics in the post-WWII U.S. recessions via non-linear (Smooth-Transition) VARs. The relevance of uncertainty shocks is found to be much larger than that predicted by standard linear VARs in terms of (i) magnitude of the reaction of the unemployment rate to such shocks, and (ii) contribution to the variance of the prediction errors of unemployment at business cycle frequencies. We discuss the ability of different classes of DSGE models to replicate our results.
Keywords: Uncertainty shocks, unemployment dynamics, Smooth Transition Vector-AutoRegressions, recessions
JEL Classification: C32, E32, E52
Suggested Citation: Suggested Citation
Here is the Coronavirus
related research on SSRN
Recommended Papers
-
Financial Conditions Indexes: A Fresh Look after the Financial Crisis
By Jan Hatzius, Peter Hooper, ...
-
Monitoring Financial Stability: A Financial Conditions Index Approach
By Scott A. Brave and R. Andrew Butters
-
Gathering Insights on the Forest from the Trees: A New Metric for Financial Conditions
By Scott A. Brave and R. Andrew Butters
-
Detecting and Interpreting Financial Stress in the Euro Area
-
The Financial Stress Index: Identification of Systemic Risk Conditions
By Mikhail V. Oet, Ryan Eiben, ...
-
Financial Stress Index: Identification of Systemic Risk Conditions
By Mikhail V. Oet, Ryan Eiben, ...
-
Financial Stress and Economic Dynamics: The Transmission of Crises
By Kirstin Hubrich and Robert J. Tetlow
-
Financial Stress and Economic Dynamics: The Transmission of Crises
By Kirstin Hubrich and Robert J. Tetlow
-
Financial Stress and Economic Dynamics: The Transmission of Crises
By Kirstin Hubrich and Robert J. Tetlow
-
CISS - A Composite Indicator of Systemic Stress in the Financial System
By Daniel Hollo, Manfred Kremer, ...
