This paper provides empirical and theoretical evidence that uncertainty shocks have strong asymmetric effects on economic activity. Specifically, in the empirical analysis I find that uncertainty shocks dampen investment and consumption twice as much during recessions than in "normal" times. In...

In this paper we investigate the effects of uncertainty shocks on economic activity using a Dynamic Stochastic General Equilibrium (DSGE) model with heterogenous agents and a stylized banking sector. We show that frictions in credit supply amplify the effects of uncertainty shocks on economic...