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  3. 蝌蚪网 Journal: Macroeconomics
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  5. Uncertainty and the Economy: The Evolving Distributions of Aggregate Supply and Demand Shocks

蝌蚪网 Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

Uncertainty and the Economy: The Evolving Distributions of Aggregate Supply and Demand Shocks

  • Geert Bekaert
  • Eric Engstrom
  • Andrey Ermolov
蝌蚪网 Journal: Macroeconomics (Forthcoming)

Abstract

We estimate the time-varying distribution of aggregate supply (AS) and aggregate demand (AD) shocks. We distinguish between traditional Gaussian uncertainty and 鈥渂ad鈥� uncertainty, associated with negative skewness. The Great Moderation is driven by a reduction in the volatility of AS shocks and the Gaussian component of AD shocks. The increased role of 鈥渂ad鈥� demand uncertainty implies that the conditional skewness of GDP growth and inflation has decreased over time. The correlation between AS/AD shocks and shocks to their conditional volatilities is generally strongly negative. The correlation between inflation and growth shocks has increased due to a decrease in AS volatility.

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