When It Rains It Pours
Cascading Uncertainty Shocks
Bibliographic Data
| ID | 10178646 |
|---|---|
| Authors | Anthony M Diercks (0000-0001-9494-5352, Federal Reserve Board of Governors), Alex Hsu (0000-0001-7987-9342, Federal Reserve Board of Governors), Andrea Tamoni (0000-0002-7017-7624, Federal Reserve Board of Governors) |
| Year | 2023 |
| Pages | 000-000 |
| Publication date | 2023-07-17 |
| Open Access | No |
| Type | ARTICLE |
| Venue | Journal of Political Economy (JOURNAL) |
| Journal identifiers | ISSN: 0022-3808 • E-ISSN: 1537-534X |
| Publisher | University of Chicago Press (PUBLISHER • US) |
| DOI | 10.1086/726705 |
| OpenAlex | W4384521358 |
| Language | EN |
| References cited | 37 |
The effects of uncertainty shocks are superadditive. On the basis of local projections, we find that the combination of nearby positive shocks can be multiple times more powerful than the sum of their stand-alone effects. In a standard New Keynesian dynamic stochastic general equilibrium model, uncertainty shocks are proven to be superadditive only when the model is solved under fourth- (or higher-)order perturbation. The fourth-order solution unlocks the fourth derivative of marginal utility, “edginess, ” which is key to generating stronger reactions to multiple risks and superadditivity. Intuitively, an agent already bearing one risk is less willing to bear another in the presence of edginess
Basis (linear algebra · Econometrics · Economics · Mathematical economics · Order (exchange · Perturbation (astronomy · Physics · Superadditivity · Economic theories and models · Market Dynamics and Volatility · Mathematics · Monetary Policy and Economic Impact
Really Uncertain Business Cycles
Uncertainty Shocks in a Model of Effective Demand
Uncertainty shocks are aggregate demand shocks
Uncertainty and Economic Activity
Impulse response analysis in nonlinear multivariate models
Uncertainty and Investment Dynamics
Substitution, Risk Aversion, and the Temporal Behavior of Consumption and Asset Returns
Precautionary Saving in the Small and in the Large
Measuring Economic Policy Uncertainty
Impulse Response Estimation by Smooth Local Projections
Consistent Covariance Matrix Estimation with Spatially Dependent Panel Data
Optimal Insurance in Incomplete Markets
Government Spending Multipliers in Good Times and in Bad
| Highly cited | No |
|---|