Uncertainty Shocks as Second-Moment News Shocks BERGER, DAVID; DEW-BECKER, IAN; GIGLIO, STEFANO
Review of economic studies/The review of economic studies,
01/2020, Volume:
87, Issue:
1 (312)
Journal Article
Peer reviewed
Open access
We provide evidence on the relationship between aggregate uncertainty and the macroeconomy. Identifying uncertainty shocks using methods from the news shocks literature, the analysis finds that ...innovations in realized stock market volatility are robustly followed by contractions, while shocks to forward-looking uncertainty have no significant effect on the economy. Moreover, investors have historically paid large premia to hedge shocks to realized but not implied volatility. A model in which fundamental shocks are skewed left can match those facts. Aggregate volatility matters, but it is the realization of volatility, rather than uncertainty about the future, that has been associated with declines.
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BFBNIB, INZLJ, IZUM, KILJ, NMLJ, NUK, PILJ, PNG, SAZU, UL, UM, UPUK, ZRSKP
This paper studies how changes in oil supply expectations affect the oil price and the macroeconomy. Using a novel identification design, exploiting institutional features of OPEC and high-frequency ...data, I identify an oil supply news shock. These shocks have statistically and economically significant effects. Negative news leads to an immediate increase in oil prices, a gradual fall in oil production, and an increase in inventories. This has consequences for the US economy: activity falls, prices and inflation expectations rise, and the dollar depreciates, providing evidence for a strong channel operating through supply expectations.
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BFBNIB, CEKLJ, INZLJ, IZUM, KILJ, NMLJ, NUK, PILJ, PNG, SAZU, UL, UM, UPUK, ZRSKP
This paper explores the determinants of carbon emissions in France by accounting for the significant role played by foreign direct investment (FDI), financial development, economic growth, energy ...consumption and energy research innovations in influencing CO2 emissions function. In this endeavour, we employ the novel SOR (Shahbaz et al. 2017) unit root test on French time series data over the period 1955–2016 to examine the order of integration in the presence of sharp and smooth structural breaks in the variables. We also apply the bootstrapping bounds testing approach, recently developed by McNown et al. (2018), to investigate the presence of cointegration and the empirical findings underscore the presence of cointegration among the time series. Moreover, we find that FDI has a positive impact, while energy research innovations have a negative impact, on French carbon emissions. Financial development lowers carbon emissions, thereby improving the French environmental quality. FDI degrades the environment, and thus supports the pollution-haven hypothesis in France. Similarly, financial development suggests that financial stability is a required condition for improving environmental quality, so are energy research innovations. Contrarily, energy consumption is positively linked with carbon emissions. However, the relationship between economic growth and CO2 emissions is an inverted-U, which is a validation of the environmental Kuznets curve (EKC).
•Role of FDI, Financial Development, and Energy Innovations in environmental degradation in France.•France attracting high inflow of FDI in recent years.•FDI degrades the environment and thus supports the pollution-haven hypothesis in France.•Financial development and energy research innovations lower carbon emissions and improve the French environmental quality.•Financial development and energy innovation are required to play important roles in improving environmental quality in France.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK, ZRSKP
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UILJ, UL, UM, UPCLJ, UPUK, ZAGLJ, ZRSKP
5.
Time-varying short-horizon predictability Henkel, Sam James; Martin, J. Spencer; Nardari, Federico
Journal of financial economics,
03/2011, Volume:
99, Issue:
3
Journal Article
Peer reviewed
In the G7 countries, the short-horizon performance of aggregate return predictors such as the dividend yield and the short rate appears non-existent during business cycle expansions but sizable ...during contractions. This phenomenon appears related to countercyclical risk premiums as well as the time-variation in the dynamics of predictors. Our empirical model outperforms the historical average out-of-sample in the US, but the results throughout the G7 are mixed.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
We present new evidence on the macroeconomic effects of changes in microprudential bank capital requirements, using confidential regulatory data from the Basel I and II regimes in the United Kingdom. ...Our central result is that an increase in capital requirements lowered lending to firms and households, reduced aggregate expenditure and raised credit spreads. A financial accelerator effect is found to have amplified the macroeconomic responses to shifts in bank credit supply. Results from a counterfactual experiment that links capital requirements to house prices and mortgage spreads indicate that tighter macroprudential policy would have had a moderating effect on house price and mortgage lending growth in the early 2000s, with easier monetary policy acting to offset its contractionary effects on output.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK, ZRSKP
Exogenous OPEC and non-OPEC oil supply cuts, which are identified within an SVAR model with unplanned oil supply outage as an external instrument, decrease industrial production and raise ...unemployment rate in the euro area. However, the transmissions to consumer price are different when OPEC and non-OPEC oil supply cuts are respectively considered. Further analyses are implemented with datasets of different sectors and individual countries. The results are robust against different identification strategies and variations in empirical specifications. Finally, our findings signify policy implications for enhancing energy security in the European Union.
•OPEC and non-OPEC oil supply shocks are identified within a proxy SVAR model.•Unplanned oil supply outage shock is served as the external instrument.•OPEC and non-OPEC oil supply shocks decreases industrial production but increases unemployment rate in the Euro area.•OPEC and non-OPEC oil supply shocks make inverse impacts on price level.•Wider macroeconomic effects are revealed by considering different sectors and EU member countries.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NLZOH, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK, ZRSKP
How important are volatility fluctuations for asset prices and the macroeconomy? We find that an increase in macroeconomic volatility is associated with an increase in discount rates and a decline in ...consumption. We develop a framework in which cash flow, discount rate, and volatility risks determine risk premia and show that volatility plays a significant role in explaining the joint dynamics of returns to human capital and equity. Volatility risk carries a sizable positive risk premium and helps account for the cross section of expected returns. Our evidence demonstrates that volatility is important for understanding expected returns and macroeconomic fluctuations.
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BFBNIB, FZAB, GIS, IJS, INZLJ, KILJ, NLZOH, NMLJ, NUK, OILJ, PNG, SAZU, SBCE, SBMB, UL, UM, UPUK, ZRSKP
We introduce a regime switching GARCH-MIDAS model to investigate the relationships between oil price volatility and its macroeconomic fundamentals. Our model takes into account both effects of ...long-term macroeconomic factors and short-term structural breaks on oil volatility. The in-sample and out-of-sample results show that macroeconomic fundamentals can provide useful information regarding future oil volatility beyond the historical volatility. We also find the evidence that the structural breaks cause higher degree of GARCH-implied volatility persistence. Two-regime GARCH-MIDAS models can significantly beat their single-regime counterparts in forecasting oil volatility out-of-sample.
•We propose a regime switching GARCH-MIDAS model to account for structural breaks.•Oil fundamentals can provide useful information regarding future volatility.•Structural breaks cause higher degree of GARCH-implied volatility persistence.•Our two-regime models perform significantly better than the single-regime model out-of-sample.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK, ZRSKP
The aim of this paper is to examine the causal relationship between financial development, trade, economic growth, energy consumption and carbon emissions in Turkey for the 1960–2007 period. The ...bounds F‐test for cointegration test yields evidence of a long-run relationship between per capita carbon emissions, per capita energy consumption, per capita real income, the square of per capita real income, openness and financial development. The results show that an increase in foreign trade to GDP ratio results an increase in per capita carbon emissions and financial development variable has no significant effect on per capita carbon emissions in the long- run. These results also support the validity of EKC hypothesis in the Turkish economy. It means that the level of CO2 emissions initially increases with income, until it reaches its stabilization point, then it declines in Turkey. In addition, the paper explores causal relationship between the variables by using error-correction based Granger causality models.
► Relationship between financial development, trade, growth, energy consumption and carbon emissions is examined. ► It shows that an increase in foreign trade results in an increase in carbon emissions. ► Financial development has no significant effect on carbon emissions in the long run. ► These results also support the validity of EKC hypothesis in Turkish economy.
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GEOZS, IJS, IMTLJ, KILJ, KISLJ, NUK, OILJ, PNG, SAZU, SBCE, SBJE, UL, UM, UPCLJ, UPUK
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