Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/319328 
Year of Publication: 
2025
Citation: 
[Journal:] Journal of Applied Econometrics [ISSN:] 1099-1255 [Volume:] 40 [Issue:] 3 [Publisher:] Wiley [Place:] Hoboken, NJ [Year:] 2025 [Pages:] 341-348
Publisher: 
Wiley, Hoboken, NJ
Abstract: 
This paper revisits the question of how shocks to expectations of market participants can cause business cycle fluctuations. We use a vector autoregression to estimate dynamic causal effects of belief shocks which are extracted from nowcast errors about output growth. In a first step, we replicate and corroborate the findings of Enders, Kleemann, and Müller (2021). The second step computes nowcast errors about growth‐at‐risk at various quantiles. This involves both recovering the quantiles of the nowcast distribution of output growth from the Survey of Professional Forecasters, and, since the true quantiles of output growth are unobserved, estimating them with quantile regressions. We document a lack of distinct patterns in response to shocks arising from nowcasts misjudging macroeconomic risk. Although the differences are statistically insignificant, belief shocks about downside risk seem to produce somewhat sharper business cycle fluctuations.
Subjects: 
density forecasting
nowcast
quantile regression
tail risk
Persistent Identifier of the first edition: 
Creative Commons License: 
cc-by Logo
Document Type: 
Article
Document Version: 
Published Version

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