Uncertainty Shocks and Financial Crisis Indicators

35 Pages Posted: 14 Oct 2019

Multiple version iconThere are 2 versions of this paper

Date Written: 2019

Abstract

The current paper broadens the understanding of the role played by uncertainty in the context of macroeconomic fluctuations. It focuses on the implications of uncertainty shocks for indicators that tend to precede financial crises. In an empirical analysis we show for a set of four euro area countries that negative uncertainty shocks, while boosting economic activity, are followed by unfavorable reactions of financial crisis indicators. We conclude that standard uncertainty measures contain some useful information on the potential buildup of vulnerabilities in the financial system.

Keywords: uncertainty, crisis indicators, structural macroeconomic shocks, sign restrictions

JEL Classification: D890, C320, E440, G010

Suggested Citation

Hristov, Nikolay and Roth, Markus, Uncertainty Shocks and Financial Crisis Indicators (2019). CESifo Working Paper No. 7839. Available at SSRN: https://ssrn.com/abstract=3467973

Nikolay Hristov

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

Markus Roth (Contact Author)

Deutsche Bundesbank ( email )

Wilhelm-Epstein-Str. 14
Frankfurt/Main, 60431
Germany

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