Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154070
Authors: 
Bijsterbosch, Martin
Guérin, Pierre
Year of Publication: 
2014
Series/Report no.: 
ECB Working Paper 1637
Abstract: 
This paper uses a two-step approach to characterize the evolution of US macroeconomic and financial variables during episodes of very high uncertainty. First, we identify episodes of very high uncertainty using a regime-switching model. Second, we assess the behaviour of macroeconomic and financial variables during these episodes of very high uncertainty. This methodology is analogous to the approach followed by Baele et al. (2013), who study episodes of flights to safety in financial markets. We find that very high uncertainty episodes are associated with a weaker growth performance and sharp declines in stock prices. However, we find that this relation is non-linear in that uncertainty does not seem to matter during periods characterized by medium or low uncertainty.
Subjects: 
Markov-switching
survey data
uncertainty
JEL: 
C24
D80
E32
E66
Document Type: 
Working Paper

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