Are uncertainty shocks a major source of business cycle fluctuations? This paper studies the
effect of a mean preserving shock to the variance of aggregate total factor productivity
(macro uncertainty) and to the dispersion of entrepreneurs' idiosyncratic productivity (micro
uncertainty) in a financial accelerator DSGE model with sticky prices. It explores the
different mechanisms through which uncertainty shocks are propagated and amplified. The
time series properties of macro and micro uncertainty are estimated using U.S. aggregate and
firm-level data, respectively. While surprise increases in micro uncertainty have a larger
impact on output than macro uncertainty, these account for a small (non-trivial) share of
output volatility.
Add to Cart by clicking price of the language and format you'd like to purchase
Available Languages and Formats
Prices in red indicate formats that are not yet available but are forthcoming.