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News and Uncertainty Shocks
Author(s) -
CASCALDIGARCIA DANILO,
GALVAO ANA BEATRIZ
Publication year - 2021
Publication title -
journal of money, credit and banking
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.763
H-Index - 108
eISSN - 1538-4616
pISSN - 0022-2879
DOI - 10.1111/jmcb.12727
Subject(s) - autoregressive model , vector autoregression , econometrics , economics , term (time) , identification (biology) , financial market , finance , physics , botany , quantum mechanics , biology
We provide novel evidence that technological news and uncertainty shocks, identified one at a time using vector autoregressive (VAR) models as in the literature, are correlated; that is, they are not truly structural . We then proceed by proposing an identification scheme to disentangle the effects of news and financial uncertainty shocks. We find that by removing financial uncertainty effects from news shocks, the positive responses of economic activity to news shocks are strengthened in the short term; and that the negative responses of activity to financial uncertainty shocks are deepened in the medium term as “good uncertainty” effects on technology are purged.