Uncertainty and Growth Disasters

53 Pages Posted: 2 Nov 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: October 2020


This paper documents several facts on the real effects of economic uncertainty. First, higher uncertainty is associated with a more dispersed distribution of output growth. Second, the relation is highly asymmetric: A rise in uncertainty is associated with a sharp decline in the lower tail of the growth distribution whereas it has a much smaller and insignificant impact on its upper tail. Third, the negative response of growth to uncertainty shocks is larger when the equity market is more volatile. We build a model in which growth and uncertainty are both endogenous: rapid adoption of new technology raises economic uncertainty and may cause measured productivity to decline. The equilibrium growth distribution is negatively skewed and higher uncertainty leads to a thicker left tail and to more labor reallocation among jobs and among

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Suggested Citation

Jovanovic, Boyan and Ma, Sai, Uncertainty and Growth Disasters (October 2020). NBER Working Paper No. w28024, Available at SSRN: https://ssrn.com/abstract=3723261

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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