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News and Uncertainty Shocks

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Abstract

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.

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  • Danilo Cascaldi-Garcia & Ana Beatriz Galvao, 2018. "News and Uncertainty Shocks," International Finance Discussion Papers 1240, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgif:1240
    DOI: 10.17016/IFDP.2018.1240
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    More about this item

    Keywords

    Forecasting error variance; Structural VAR; News shocks; Uncertainty shocks;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy

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