Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/181305 
Year of Publication: 
2018
Series/Report no.: 
CESifo Working Paper No. 7105
Publisher: 
Center for Economic Studies and ifo Institute (CESifo), Munich
Abstract: 
We model U.S. post-WWII monthly data with a Smooth Transition VAR model and study the effects of an unanticipated increase in economic policy uncertainty on unemployment in recessions and expansions. We find the response of unemployment to be statistically and economically larger in recessions. A state-contingent forecast error variance decomposition analysis confirms that the contribution of EPU shocks to the volatility of unemployment at business cycle frequencies is markedly larger in recessions.
Subjects: 
economic policy uncertainty shocks
unemployment dynamics
Smooth Transition Vector AutoRegressions
recessions
expansions
JEL: 
C32
E32
E52
Document Type: 
Working Paper
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