Working Paper

Components of uncertainty

Author: Vegard Høghaug Larsen
Series: Working Paper
Number: 5/2017

Working Paper 5/2017 (PDF 2.5 Mb)

Abstract:

Uncertainty is acknowledged to be a source of economic fluctuations. But, does the type of uncertainty matter for the economy's response to an uncertainty shock? This paper offers a novel identification strategy to disentangle different types of uncertainty. It uses machine learning techniques to classify different types of news instead of specifying a set of keywords. It is found that, depending on its source, the effects of uncertainty on macroeconomic variable may differ. I fi nd that both good(expansionary effect) and bad (contractionary effect) types of uncertainty exist.

Published 18 April 2017 12:45