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Literature Review
Literature Review
(Bonciani & Roye, 2016), analyzed the effects of uncertainty shocks on economic
activity in the euro area under financial frictions by using Vector Autoregressive model,
find that the frictions in banking sector increase the negative effects of uncertainty
shocks on economic activity. They find that the financial frictions make uncertainty
shocks further importunate and are the root cause of passing on the uncertainty shocks
to the economy.
(Leduc & Liu, 2016), estimate uncertainty in labor market by using Michigan survey and
a Vector Autoregressive model, examined that an uncertainty shocks can engender the
higher unemployment and lowers the inflation and nominal interest rate. They suggest
that the interaction between search frictions and nominal rigidities are significant for
increasing the unemployment trail of uncertainty shocks.
In a non linear framework, (Pragidis, Gogas, Plakandaras, & Papadimitriou, 2015) try to
estimate the fiscal policy shocks on U.S. growth rate and output by taking quarterly data
ranging from 1967:1 to 2011:4, using Vector Autoregressive model and Machine
Learning techniques. They extort eight type of fiscal shocks four from a negative and a
positive analyzed that the asymmetries in the conduct of fiscal policy cannot be
rejected.
References
Bonciani, D., & Roye, B. van. (2016). Uncertainty shocks, banking frictions and economic
https://doi.org/10.1016/j.jedc.2016.09.008
Leduc, S., & Liu, Z. (2016). Uncertainty shocks are aggregate demand shocks. Journal of
Pragidis, I., Gogas, P., Plakandaras, V., & Papadimitriou, T. (2015). Fiscal shocks and