What Are The Macroeconomic Effects of High-Frequency Uncertainty Shocks?

Following the Great Recession, econometric models that better account for un certainty have gained increased attention, and an increasing number of works evaluate the effects of uncertainty shocks. In this paper, we evaluate the impact of high-frequency uncertainty shocks on a set of low-frequency macroeconomic variables representative of the U.S. economy. Rather than estimating models at the same common low-frequency, we use recently developed econometric methodology that allows us to avoid aggregating high-frequency data before estimating models. The impulse response analysis uncovers various salient facts. First, in line with the existing literature, high-frequency uncertainty shocks are associated with a broad-based decline in economic activity. Second, we find that credit and labor market variables react the most to uncertainty shocks. Third, we show that the responses of macroeconomic variables to uncertainty shocks are relatively similar across single-frequency and mixed-frequency data models, suggesting that the temporal aggregation bias is not acute in this context. Finally, we find that some macroeconomic variables exhibit an asymmetric response to uncertainty shocks over the different phases of the business cycle.