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Macroeconomic Uncertainty and Vector Autoregressions

Author

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  • Forni, Mario
  • Gambetti, Luca
  • Sala, Luca
Abstract
We estimate measures of macroeconomic uncertainty and compute the effects of uncertainty shocks by means of a new simple procedure based on standard VARs. Uncertainty and its effects are estimated using a single model so to ensure internal consistency. Under suitable assumptions, our procedure is equivalent to using the square of the VAR forecast error as an external instrument in a proxy SVAR. Our procedure allows to add orthogonality constraints to the standard proxy SVAR identification scheme. We apply our method to a US data set; we find that uncertainty is mainly exogenous and is responsible of a large fraction of business-cycle fluctuations.

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  • Forni, Mario & Gambetti, Luca & Sala, Luca, 2021. "Macroeconomic Uncertainty and Vector Autoregressions," CEPR Discussion Papers 15692, C.E.P.R. Discussion Papers.
    • Handle: RePEc:cpr:ceprdp:15692
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    References listed on IDEAS

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    Cited by:

    1. repec:zbw:bofrdp:2022_005 is not listed on IDEAS
    2. Ambrocio, Gene, 2020. "Inflationary household uncertainty shocks," Research Discussion Papers 5/2020, Bank of Finland.
    3. Ambrocio, Gene, 2020. "Inflationary household uncertainty shocks," Bank of Finland Research Discussion Papers 5/2020, Bank of Finland.

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    More about this item

    Keywords

    Uncertainty shocks; Var models; Ols estimation; stochastic volatility;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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