Seminarios

Abstract
While the causes and consequences of uncertainty in the US economy have attracted a great deal of research interest over the past decade, the literature still lacks a consensus on several aspects. In specific, a debate has developed if uncertainty shocks are a source or the result of recessions and whether or not these shocks have adverse effects on the economy. Moreover, some recent studies point to realized volatility as a potential trigger of economic slowdown, which has been previously incorrectly attributed to uncertainty shocks. We argue that the first two issues boil down to the choice of an appropriate identification strategy in structural vector autoregres- sive (SVAR) models, i.e., narrative constraints might not be sufficient to identify uncertainty shocks. Instead, we propose an easy-to-employ generic approach based on independent com-
ponent analysis (ICA). We find that alternative types of uncertainty shocks are exogenous to business cycle fluctuations and cause economic downturns. Furthermore, if the anticipation or realization of volatility causes business cycle fluctuations is crucially related to the choice of an adequate uncertainty proxy. In this regard our results show that realized volatility is the result of economic and financial turbulence, not the cause.

--