WEAI 96th Annual Conference

Abstract

Business cycle models have been trying to identify casual effects of different shocks in the business cycle. There are research works on the effects of technological, monetary, oil price and other various shock in the model to identify the reasons for business cylcle fluctuations. Post Great Recession, there is a renewed interest in uncertainty shocks as there is a growing recognition of their role in driving fluctuations in the economy. I use two news-based indicators- News-based policy uncertainty and Equity-Market volatility as a measure for both Policy-Specific uncertainty and general economic uncertainty for the period 2000-2020. Next,in order to determine the role of monetary authority in these cycles, I look at the response of the interest rates for these shocks. The results, using an SVAR model, indicate that uncertainty shocks – both general and policy related – depress the level of economic activity, with Volatility shocks having more severe and instantaneous impact on the economy. The robustness tests suggests that the results of the SVAR model is robust.

Bitaran Jang Maden

Visiting Assistant Professor

My research interests include monetary economics, time series econometrics and applied macro economics matter.