Components of Uncertainty
41 Pages Posted: 20 Apr 2017
Date Written: April 18, 2017
Abstract
Uncertainty is acknowledged to be a source of economic fluctuations. But, does the type of uncertainty matter for the economy's response to an uncertainty shock? This paper offers a novel identification strategy to disentangle different types of uncertainty. It uses machine learning techniques to classify different types of news instead of specifying a set of keywords. It is found that, depending on its source, the effects of uncertainty on macroeconomic variable may differ. I find that both good (expansionary effect) and bad (contractionary effect) types of uncertainty exist.
Keywords: Newspaper, Topic model, Uncertainty, Business cycles, Machine learning
JEL Classification: D80, E32, E66
Suggested Citation: Suggested Citation