Components of uncertainty
- Author:
- Vegard Høghaug Larsen
- Series:
- Working Paper
- Number:
- 5/2017
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.
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ISSN 1502-8143 (online)