News and Uncertainty Shocks

42 Pages Posted: 29 Nov 2018 Last revised: 29 Apr 2020

See all articles by Danilo Cascaldi-Garcia

Danilo Cascaldi-Garcia

Board of Governors of the Federal Reserve System

Ana Beatriz Galvão

University of Warwick

Date Written: 2018-11


We provide novel evidence that technological news and uncertainty shocks, identified one at a time using VAR models as in the literature, are correlated; that is, they are not truly structural. We then proceed by proposing an identification scheme to disentangle the effects of news and financial uncertainty shocks. We find that by removing uncertainty effects from news shocks, the positive responses of economic activity to news shocks are strengthened in the short term; and that the negative responses of activity to financial uncertainty shocks are deepened in the medium term as ‘good uncertainty' effects on technology are purged.

Keywords: Forecasting error variance, Structural VAR, News shocks, Uncertainty shocks

JEL Classification: E32, E44

Suggested Citation

Cascaldi-Garcia, Danilo and Galvão, Ana Beatriz, News and Uncertainty Shocks (2018-11). FRB International Finance Discussion Paper No. 1240, Available at SSRN: or

Danilo Cascaldi-Garcia (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Ana Beatriz Galvão

University of Warwick ( email )

Coventry CV4 7AL
United Kingdom

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