Using Disasters to Estimate the Impact of Uncertainty

• 成果类型: Article
• 署名作者: Baker, Scott R.; Bloom, Nicholas; Terry, Stephen J.
• 署名单位: Northwestern University; National Bureau of Economic Research; Stanford University; Boston University
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdad036
• 发表日期: 2024
• 页码: 720-747
• 关键词: rare disasters; volatility; RISK; shocks; INVESTMENT; GROWTH; price; MODEL; irreversibility; identification

摘要

Uncertainty rises in recessions and falls in booms. But what is the causal relationship? We construct cross-country panel data on stock market returns to proxy for first- and second-moment shocks and instrument these with natural disasters, terrorist attacks, and political shocks. Our IV regression results reveal a robust negative short-term impact of second moments (uncertainty) on growth. Employing multiple vector autoregression estimation approaches, relying on a range of identifying assumptions, also reveals a negative impact of uncertainty on growth. Finally, we show that these results are reproducible in a conventional micro-macro business cycle model with time-varying uncertainty.