scholarly journals The Impact of Uncertainty Shocks

2007 ◽  
Author(s):  
Nicholas Bloom
Keyword(s):  
Uncertainty Shocks ◽  
The Impact

Assessing the impact of Covid-19 pandemic in Turkey with a novel economic uncertainty index

2021 ◽  
Vol ahead-of-print (ahead-of-print) ◽  
Author(s):  
Erhan Mugaloglu ◽  
Ali Yavuz Polat ◽  
Hasan Tekin ◽  
Edanur Kılıç
Keyword(s):  
Industrial Production ◽  
Explanatory Power ◽  
Principal Component ◽  
Intermediate Goods ◽  
Economic Uncertainty ◽  
Content Type ◽  
Uncertainty Shocks ◽  
Political Events ◽  
Uncertainty Index ◽  
The Impact

PurposeThis study aims to measure economic uncertainty in Turkey by a novel economic uncertainty index (EUI) employing principal component analysis (PCA). We assess the impact of Covid-19 pandemic in Turkey with our constructed uncertainty index.Design/methodology/approachIn order to obtain the EUI, this study employs a dimension reduction method of PCA using 14 macroeconomic indicators that spans from January 2011 to July 2020. The first principal component is picked as a proxy for the economic uncertainty in Turkey which explains 52% of total variation in entire sample. In the second part of our analysis, with our constructed EUI we conduct a structural vector autoregressions (SVAR) analysis simulating the Covid-19-induced uncertainty shock to the real economy.FindingsOur EUI sensitively detects important economic/political events in Turkey as well as Covid-19-induced uncertainty rising to extremely high levels during the outbreak. Our SVAR results imply a significant decline in economic activity and in the sub-indices as well. Namely, industrial production drops immediately by 8.2% and cumulative loss over 8 months will be 15% on average. The losses in the capital and intermediate goods are estimated to be 18 and 25% respectively. Forecast error variance decomposition results imply that uncertainty shocks preserve its explanatory power in the long run, and intermediate goods production is more vulnerable to uncertainty shocks than overall industrial production and capital goods production.Practical implicationsThe results indicate that monetary and fiscal policy should aim to decrease uncertainty during Covid-19. Moreover, since investment expenditures are affected severely during the outbreak, policymakers should impose investment subsidies.Originality/valueThis is the first study constructing a novel EUI which sensitively captures the critical economic/political events in Turkey. Moreover, we assess the impact of Covid-19-driven uncertainty on Turkish Economy with a SVAR model.

The Impact of Energy Market Uncertainty Shocks on Energy Transition in Europe

2019 ◽  
Vol 40 (01) ◽  
Author(s):  
Mehmet Balcilar ◽  
David Roubaud ◽  
Muhammad Shahbaz
Keyword(s):  
Energy Transition ◽  
Energy Market ◽  
Market Uncertainty ◽  
Uncertainty Shocks ◽  
The Impact

scholarly journals The impact of uncertainty shocks in emerging economies

2013 ◽  
Vol 90 (2) ◽  
pp. 316-325 ◽  
Author(s):  
Yan Carrière-Swallow ◽  
Luis Felipe Céspedes
Keyword(s):  
Emerging Economies ◽  
Uncertainty Shocks ◽  
The Impact

Uncertainty and the Shadow Banking Crisis: Estimates from a Dynamic Model

2021 ◽  
Author(s):  
Xu Tian
Keyword(s):  
Banking Sector ◽  
The United States ◽  
Parameter Estimates ◽  
Shadow Banking ◽  
Data Set ◽  
Asset Return ◽  
Shadow Banks ◽  
Uncertainty Shocks ◽  
Maturity Mismatch ◽  
The Impact

Shadow banks play an important role in the modern financial system and are arguably the source of key vulnerabilities that led to the 2007–2009 financial crisis. I develop a quantitative framework with uncertainty fluctuations and endogenous bank default to study the dynamics of shadow banking. I argue that the increase in asset return uncertainty during the crisis results in a spread spike, making it more costly for shadow banks to roll over their debt in the short-term debt market. As a result, these financial institutions are forced to deleverage, leading to a decrease in credit intermediation. The model is estimated using a bank-level data set of shadow banks in the United States. The parameter estimates imply that uncertainty shocks can explain 72% of asset contraction and 70% of deleveraging in the shadow banking sector. Maturity mismatch and asset fire-sales amplify the impact of the uncertainty shocks. First-moment shocks to bank asset return, financial shocks, or fire-sale cost shocks alone cannot reproduce the large interbank spread spike, dramatic deleveraging, or contraction in the U.S. shadow banking sector during the crisis. The model also allows for policy experiments. I analyze how unconventional monetary policies can help to counter the rise in the interbank spread, thus stabilizing the credit supply. Taking bank moral hazard into consideration, I find that government bailout might be counterproductive as it might result in more aggressive risk-taking among shadow banks, especially when bailout decisions are based on bank characteristics. This paper was accepted by Gustavo Manso, finance.

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