Uncertainty and Growth Disasters

35 Pages Posted: 15 Jun 2020

See all articles by Boyan Jovanovic

Boyan Jovanovic

New York University - Department of Economics

Sai Ma

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: May, 2020


This paper documents several stylized facts on the real effects of economic uncertainty. First, higher uncertainty is associated with a more dispersed and negatively skewed distribution of output growth. Second, the response of economic growth to an increase in uncertainty is highly nonlinear and asymmetric. Third, higher asset volatility magnifies the negative impact of uncertainty on growth. We develop and estimate an analytically tractable model in which rapid adoption of new technology may raise economic uncertainty which causes measured productivity to decline. The equilibrium growth distribution is negatively skewed and higher uncertainty leads to a thicker left tail.

JEL Classification: D80, E44, O40, O47

Suggested Citation

Jovanovic, Boyan and Ma, Sai, Uncertainty and Growth Disasters (May, 2020). FRB International Finance Discussion Paper No. 1279, Available at SSRN: https://ssrn.com/abstract=3625099 or http://dx.doi.org/10.17016/IFDP.2020.1279

Boyan Jovanovic (Contact Author)

New York University - Department of Economics ( email )

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Sai Ma

Board of Governors of the Federal Reserve System ( email )

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