TY  - JOUR
AU  - Bloom,Nicholas
AU  - Floetotto,Max
AU  - Jaimovich,Nir
AU  - Saporta-Eksten,Itay
AU  - Terry,Stephen J.
TI  - Really Uncertain Business Cycles
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 18245
PY  - 2012
Y2  - July 2012
UR  - http://www.nber.org/papers/w18245
L1  - http://www.nber.org/papers/w18245.pdf
N1  - Author contact info:
Nicholas Bloom
Stanford University
Department of Economics
579 Serra Mall
Stanford, CA 94305-6072
Tel: 650/725-3266
Fax: 650/725-5702
E-Mail: nbloom@stanford.edu

Max Floetotto
McKinsey & Company
Cherubinistr. 4
80803 Munich
Germany
E-Mail: max.floetotto@alumni.stanford.edu

Nir Jaimovich
Department of Economics
Duke University
213 Social Services Building
Durham, NC 27708
Tel: 919/660-1864
E-Mail: njaimo@gmail.com

Itay Saporta Eksten
Stanford University
Department of Economics
579 Serra Mall
Stanford CA 94305
E-Mail: isaporta@stanford.edu

Stephen J. Terry
Stanford University
Department of Economics
579 Serra Mall
Stanford CA 94305
E-Mail: stephenjamesterry@gmail.com
AB  - We propose uncertainty shocks as a new shock that drives business cycles. First, we demonstrate that microeconomic uncertainty is robustly countercyclical, rising sharply during recessions, particularly during the Great Recession of 2007-2009. Second, we quantify the impact of time-varying uncertainty on the economy in a dynamic stochastic general equilibrium model with heterogeneous firms. We find that reasonably calibrated uncertainty shocks can explain drops and rebounds in GDP of around 3%. Moreover, we show that increased uncertainty alters the relative impact of government policies, making them initially less effective and then subsequently more effective.
ER  -