Components of Uncertainty

41 Pages Posted: 20 Apr 2017

Date Written: April 18, 2017

Abstract

Uncertainty is acknowledged to be a source of economic fluctuations. But, does the type of uncertainty matter for the economy's response to an uncertainty shock? This paper offers a novel identification strategy to disentangle different types of uncertainty. It uses machine learning techniques to classify different types of news instead of specifying a set of keywords. It is found that, depending on its source, the effects of uncertainty on macroeconomic variable may differ. I find that both good (expansionary effect) and bad (contractionary effect) types of uncertainty exist.

Keywords: Newspaper, Topic model, Uncertainty, Business cycles, Machine learning

JEL Classification: D80, E32, E66

Suggested Citation

Larsen, Vegard, Components of Uncertainty (April 18, 2017). Norges Bank Working Paper 5/2017. Available at SSRN: https://ssrn.com/abstract=2955655 or http://dx.doi.org/10.2139/ssrn.2955655

Vegard Larsen (Contact Author)

Norges Bank ( email )

P.O. Box 1179
Oslo, Oslo N-0107
Norway
+4745831155 (Phone)

HOME PAGE: http://www.vegardlarsen.com

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