Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/129209
Authors: 
Piffer, Michele
Podstawski, Maximilian
Year of Publication: 
2016
Series/Report no.: 
DIW Discussion Papers 1549
Abstract: 
We propose a new instrument to identify the impact of uncertainty shocks in a SVAR model with external instruments. We construct the instrument for uncertainty shocks by exploiting variations in the price of gold around selected events. The events capture periods of changes in uncertainty unrelated to other macroeconomic shocks. The variations in the price of gold around such events provide a measure correlated with the underlying uncertainty shocks, due to the perception of gold as a safe haven asset. The proposed approach improves upon the recursive identification of uncertainty shocks by not restricting only one structural shock to potentially affect all variables in the system. Replicating Bloom (2009), we find that the recursive approach underestimates the effects of uncertainty shocks and their role in driving monetary policy.
Subjects: 
economic uncertainty
external proxy SVAR
safe haven assets
JEL: 
E32
C32
D81
Document Type: 
Working Paper

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