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Political uncertainty in a data-rich environment

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  • Scheffel, Eric Michael

Abstract

We asses the general robustness of previous findings claiming that policy uncertainty exerts non-trivial influences on the US economy. Measuring the dynamic effects from a shock to policy uncertainty within a FAVAR model permits gauging the response of many more variables to policy uncertainty than is possible in a simple VAR model. Our results summarized by impulse responses are all corrected for small sample bias using a bootstrap-after-bootstrap method. Our findings support the view of policy uncertainty exerting a statistically significant influence on the economy, which is however not always as economically significant for a number of variables as found in previous studies.

Suggested Citation

  • Scheffel, Eric Michael, 2012. "Political uncertainty in a data-rich environment," MPRA Paper 37318, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:37318
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    References listed on IDEAS

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    More about this item

    Keywords

    policy uncertainty; FAVAR; factor analysis; principal component analysis; impulse response analysis; small-sample bias;
    All these keywords.

    JEL classification:

    • E22 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Investment; Capital; Intangible Capital; Capacity
    • H41 - Public Economics - - Publicly Provided Goods - - - Public Goods
    • E23 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Production
    • E21 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Consumption; Saving; Wealth

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