Really Uncertain Business Cycles / Nicholas Bloom, Max Floetotto, Nir Jaimovich, Itay Saporta-Eksten, Stephen J. Terry.

Format:

Book

Author/Creator:

Bloom, Nicholas.

Contributor:

National Bureau of Economic Research.

Floetotto, Max.

Jaimovich, Nir.

Saporta-Eksten, Itay.

Terry, Stephen J.

Series:

Working Paper Series (National Bureau of Economic Research) no. w18245.

NBER working paper series no. w18245

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2012.

Summary:

We propose uncertainty shocks as a new shock that drives business cycles. First, we demonstrate that microeconomic uncertainty is robustly countercyclical, rising sharply during recessions, particularly during the Great Recession of 2007-2009. Second, we quantify the impact of time-varying uncertainty on the economy in a dynamic stochastic general equilibrium model with heterogeneous firms. We find that reasonably calibrated uncertainty shocks can explain drops and rebounds in GDP of around 3%. Moreover, we show that increased uncertainty alters the relative impact of government policies, making them initially less effective and then subsequently more effective.

Notes:

Print version record

July 2012.