Journal article
Creative destruction and uncertainty
- Abstract:
- Uncertainty rises in recessions. But does uncertainty cause downturns or vice versa? This paper argues that counter-cyclical uncertainty fluctuations are a by-product of technology growth. 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 technology growth spurs a creative destruction process, generates a temporary downturn, and renders uncertainty counter-cyclical. Estimates from structural vector autoregressions (VARs) on U.S. data confirm the model’s predictions. On average, 1/4 of the cyclical variation in uncertainty is driven by technology shocks. This fraction rises to 2/3 around the “dot-com” bubble.
- Publication status:
- Published
- Peer review status:
- Peer reviewed
Actions
Access Document
- Files:
-
-
(Preview, Accepted manuscript, pdf, 393.7KB, Terms of use)
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- Publisher copy:
- 10.1093/jeea/jvz047
Authors
- Publisher:
- Oxford University Press
- Journal:
- Journal of the European Economic Association More from this journal
- Volume:
- 18
- Issue:
- 4
- Pages:
- 1814-1843
- Publication date:
- 2019-08-13
- Acceptance date:
- 2019-02-16
- DOI:
- EISSN:
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1542-4774
- ISSN:
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1542-4766
- Language:
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English
- Pubs id:
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pubs:985059
- UUID:
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uuid:519b518b-4b65-4c95-8073-2f4c69eb1ef0
- Local pid:
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pubs:985059
- Source identifiers:
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985059
- Deposit date:
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2019-03-27
- ARK identifier:
Terms of use
- Copyright holder:
- Petr Sedláček
- Copyright date:
- 2019
- Rights statement:
- © The Author(s) 2019. Published by Oxford University Press on behalf of European Economic Association.
- Notes:
-
This is the accepted manuscript version of the article. The final version is available from Oxford University Press at https://doi.org/10.1093/jeea/jvz047
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