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The Effects of Uncertainty Shocks on Daily Prices

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  • Dario Bonciani

    (European University Institute)

  • Andrea Tafuro

Abstract

In this paper, we investigate the effects of uncertainty shocks on the US daily online price index by Cavallo and Rigobon (J Econ Perspect 30(2):151–78, 2016) within a VAR framework. We find evidence that shocks increasing uncertainty dampen prices significantly. This result is robust to various changes to the baseline model and rejects the Upward Pricing Bias that is often found in the Sticky-Price DSGE literature.

Suggested Citation

  • Dario Bonciani & Andrea Tafuro, 2018. "The Effects of Uncertainty Shocks on Daily Prices," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 14(1), pages 89-104, April.
    • Handle: RePEc:spr:jbuscr:v:14:y:2018:i:1:d:10.1007_s41549-018-0024-2
    DOI: 10.1007/s41549-018-0024-2
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    More about this item

    Keywords

    Uncertainty shocks; Daily online price index; SVAR;
    All these keywords.

    JEL classification:

    • E31 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Price Level; Inflation; Deflation
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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