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Observations on Uncertainty
Author(s) -
Bloom Nicholas
Publication year - 2017
Publication title -
australian economic review
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.308
H-Index - 29
eISSN - 1467-8462
pISSN - 0004-9018
DOI - 10.1111/1467-8462.12203
Subject(s) - brexit , economics , recession , consumption (sociology) , great recession , gross domestic product , investment (military) , international economics , business cycle , monetary economics , macroeconomics , international trade , european union , keynesian economics , political science , social science , sociology , politics , law
I discuss three phenomena which appear important for modelling the impact of uncertainty on growth. The first is international spillovers in uncertainty, which arise even in large countries like the United States and particularly in smaller countries like Australia. Second, that the main channel for uncertainty to impact gross domestic product growth is through investment, which responds much more strongly and rapidly than consumption expenditure. This is possibly because firms are more forward‐looking than consumers, so respond more strongly to changes in future expectations of business conditions. Third, I discuss how recently uncertainty has spiked in three waves: the great recession of 2008–2009, the fiscal crises in the United States and Europe from 2010 to 2012 and recently after the Brexit and Trump votes.