Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/155569
Authors: 
Piffer, Michele
Podstawski, Maximilian
Year of Publication: 
2017
Series/Report no.: 
CESifo Working Paper 6327
Abstract: 
We propose a new instrument to identify uncertainty shocks in a SVAR model with external instruments. The instrument is constructed by exploiting variations in the price of gold around events that capture periods of changes in uncertainty. The variations in the price of gold around the events correlate with the underlying uncertainty shocks, due to the perception of gold as a safe haven asset. To control for possible news-related effects associated with the events, we identify uncertainty and news shocks jointly, developing a set-identified proxy SVAR with restrictions on the correlations between shocks and proxies. We find that the recursive approach, extensively used in the literature, underestimates the effects of uncertainty shocks and delivers shocks that have more in common with news shocks than with uncertainty shocks.
Subjects: 
economic uncertainty
external proxy SVAR
safe haven assets
news shocks
set-identification
JEL: 
E32
C32
D81
Document Type: 
Working Paper

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