Show simple item record

dc.contributor.authorOH, Joonseok
dc.contributor.authorROGANTINI PICCO, Anna
dc.date.accessioned2019-10-10T13:27:24Z
dc.date.available2019-10-10T13:27:24Z
dc.date.issued2019
dc.identifier.issn1725-6704
dc.identifier.urihttps://hdl.handle.net/1814/64526
dc.description.abstractThis paper illustrates how households' heterogeneity is crucial for the propagation of uncertainty shocks. We empirically show that an uncertainty shock generates a drop in aggregate consumption, job finding rate, and inflation: the aggregate consumption response is mainly driven by the consumption response of the bottom 60% of the income distribution. A heterogeneous-agent New Keynesian model with search and matching frictions and Calvo pricing rationalizes our findings. Uncertainty shocks induce households' precautionary saving and firms' precautionary pricing behaviors, triggering a fall in aggregate demand and supply. The two precautionary behaviors increase the unemployment risk of the imperfectly insured, who strengthen their precautionary saving behavior. When the feedback loop between unemployment risk and precautionary saving is strong enough, a rise in uncertainty leads to a decrease in inflation. Contrary to standard representative agent New Keynesian models, our model qualitatively and quantitatively matches the empirical evidence on uncertainty shock propagation.en
dc.format.mimetypeapplication/pdfen
dc.language.isoenen
dc.publisherEuropean University Instituteen
dc.relation.ispartofseriesEUI ECOen
dc.relation.ispartofseries2019/02en
dc.relation.isreplacedbyhttps://hdl.handle.net/1814/69000
dc.rightsinfo:eu-repo/semantics/openAccessen
dc.subjectUncertaintyen
dc.subjectInflationen
dc.subjectUnemployment risken
dc.subjectPrecautionary savingsen
dc.subjectE12en
dc.subjectE31en
dc.subjectE32en
dc.subjectJ64en
dc.titleMacro uncertainty and unemployment risken
dc.typeWorking Paperen


Files associated with this item

Icon

This item appears in the following Collection(s)

Show simple item record