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TOPIC:
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CREATIVE DESTRUCTION AND UNCERTAINTY
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ABSTRACT
Uncertainty rises in recessions. But does uncertainty cause downturns or vice versa? This paper argues that uncertainty fluctuates endogenously in response to technology growth changes. In a firm dynamics model with endogenous technology adoption, faster technology growth widens the dispersion of firm-level productivity shocks, a benchmark uncertainty measure. Moreover, faster growth spurs a creative destruction process, generates a temporary downturn and renders uncertainty counter-cyclical. Estimates from structural VARs on U.S. data confirm the model's predictions. On average, shocks to technology growth explain 1/4 of the cyclical variation in uncertainty, and up to 2/3 around the "dot-com" bubble.
Keywords: Creative destruction, Uncertainty, Business cycles, Growth
JEL Codes: D22, E32, D80
Click here to view the paper.
Click here to view the CV.
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PRESENTER
Petr Sedlacek
University of Oxford
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RESEARCH FIELDS
Macroeconomics
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DATE:
5 September 2018 (Wednesday)
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TIME:
4pm - 5.30pm
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VENUE:
Meeting Room 5.1, Level 5
School of Economics
Singapore Management University
90 Stamford Road
Singapore 178903
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