When It Rains It Pours: Cascading Uncertainty Shocks

• 成果类型: Article
• 署名作者: Diercks, Anthony M.; Hsu, Alex; Tamoni, Andrea
• 署名单位: Federal Reserve System - USA; Federal Reserve System Board of Governors; University System of Georgia; Georgia Institute of Technology; Rutgers University System; Rutgers University New Brunswick; Rutgers University Newark
• 刊物名称: JOURNAL OF POLITICAL ECONOMY
• ISSN/ISSBN: 0022-3808
• DOI: 10.1086/726705
• 发表日期: 2024
• 页码: 694-720
• 关键词: equilibrium-models; RISK; approximation; unemployment

摘要

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.