Uncertainty and Growth Disasters

Boyan Jovanovic () and Sai Ma

Review of Economic Dynamics, 2022, vol. 44, 33-64

Abstract: This paper documents several facts on the real effects of economic uncertainty. First, higher uncertainty is associated with a more dispersed distribution of output growth. Second, the relation is highly asymmetric: A rise in uncertainty is associated with a sharp decline in the lower tail of the growth distribution whereas it has a much smaller and insignificant impact on its upper tail. We build a model in which growth and uncertainty are both endogenous: rapid adoption of new technology raises economic uncertainty and may occasionally cause measured productivity to decline. The equilibrium growth distribution is negatively skewed and higher uncertainty leads to a thicker left tail. (Copyright: Elsevier)

Keywords: Uncertainty and growth; Volatility; Downside risk; Growth-at-risk (search for similar items in EconPapers)
JEL-codes: D80 E44 O40 O47 (search for similar items in EconPapers)
Date: 2022
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Citations: View citations in EconPapers (3)

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DOI: 10.1016/j.red.2021.04.002

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