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Expected, unexpected, good and bad aggregate uncertainty

Author

Listed:
  • Uribe Jorge M.

    (Faculty of Economics and Business, Open University of Catalonia, Barcelona, Spain)

  • Chuliá Helena

    (Department of Econometrics & Riskcenter-IREA, Universidad de Barcelona, Barcelona, Spain)

Abstract

We study aggregate uncertainty and its linear and nonlinear impact on real and financial markets. By distinguishing between four general notions of aggregate uncertainty (good-expected, bad-expected, good-unexpected, bad-unexpected) within a simple, common framework, we show that it is bad-unexpected uncertainty shocks that generate a negative reaction of economic variables (such as investment and consumption) and asset prices. Our results help to elucidate the real, complex nature of uncertainty, which can be both a backward- or forward-looking expected or unexpected event, with markedly different consequences for the economy. We also document nonlinearities in the propagation of uncertainty to both real and financial markets, which calls for the close monitoring of the evolution of uncertainty so as to help mitigate the adverse effects of its occurrence.

Suggested Citation

  • Uribe Jorge M. & Chuliá Helena, 2023. "Expected, unexpected, good and bad aggregate uncertainty," Studies in Nonlinear Dynamics & Econometrics, De Gruyter, vol. 27(2), pages 265-284, April.
    • Handle: RePEc:bpj:sndecm:v:27:y:2023:i:2:p:265-284:n:7
    DOI: 10.1515/snde-2020-0127
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    References listed on IDEAS

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    1. Segal, Gill & Shaliastovich, Ivan & Yaron, Amir, 2015. "Good and bad uncertainty: Macroeconomic and financial market implications," Journal of Financial Economics, Elsevier, vol. 117(2), pages 369-397.
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    aggregate uncertainty; asset prices; economic activity; nonlinear effects;
    All these keywords.

    JEL classification:

    • C58 - Mathematical and Quantitative Methods - - Econometric Modeling - - - Financial Econometrics
    • E20 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - General (includes Measurement and Data)
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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