Really Uncertain Business Cycles

Bloom, Nicholas; Floetotto, Max; Jaimovich, Nir; Eksten, Itay Saporta; Terry, Stephen

doi:10.2139/ssrn.2423516

Cited by 449 publications

(812 citation statements)

References 81 publications

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“…Evidence for the link between market volatility and economic recessions is reported in Schwert (1989). At a firm level, Bloom et al (2009) finds that there is a clear effect of recession on volatility.…”

Section: Market Capitalization In the Estimation Of Varmentioning

confidence: 99%

Market capitalization and Value-at-Risk

Dias

2013

Journal of Banking & Finance

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The potential of economic variables for financial risk measurement is an open field for research. This article studies the role of market capitalization in the estimation of Value-at-Risk (VaR). We test the performance of different VaR methodologies for portfolios with different market capitalization. We perform the analysis considering separately financial crisis periods and non-crisis periods.We find that VaR methods perform differently for portfolios with different market capitalization. For portfolios with stocks of different sizes we obtain better VaR estimates when taking market capitalization into account. We also find that it is important to consider crisis and non-crisis periods separately when estimating VaR across different sizes. This study provides evidence that market fundamentals are relevant for risk measurement.

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Section: Market Capitalization In the Estimation Of Varmentioning

confidence: 99%

Market capitalization and Value-at-Risk

Dias

2013

Journal of Banking & Finance

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“…Bloom et al (2012), Chugh (2011) and Bachmann and Bayer (2011) who also find that their measures of uncertainty, using different data sources and constructs, are countercyclical. Our interval.…”

mentioning

confidence: 99%

The Measurement and Behavior of Uncertainty: Evidence from the ECB Survey of Professional Forecasters

Abel

Rich

Song³

et al. 2015

J. Appl. Econ.

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Standard-Nutzungsbedingungen:Die Dokumente auf EconStor dürfen zu eigenen wissenschaftlichen Zwecken und zum Privatgebrauch gespeichert und kopiert werden.Sie dürfen die Dokumente nicht für öffentliche oder kommerzielle Zwecke vervielfältigen, öffentlich ausstellen, öffentlich zugänglich machen, vertreiben oder anderweitig nutzen.Sofern die Verfasser die Dokumente unter Open-Content-Lizenzen (insbesondere CC-Lizenzen) zur Verfügung gestellt haben sollten, gelten abweichend von diesen Nutzungsbedingungen die in der dort genannten Lizenz gewährten Nutzungsrechte. Terms of use: Documents in AbstractWe use matched point and density forecasts of output growth and infl ation from the ECB Survey of Professional Forecasters to derive measures of forecast uncertainty, forecast dispersion, and forecast accuracy. We construct uncertainty measures from aggregate density functions as well as from individual histograms. The uncertainty measures display countercyclical behavior, and there is evidence of increased uncertainty for output growth and infl ation since 2007. The results also indicate that uncertainty displays a very weak relationship with forecast dispersion, corroborating the fi ndings of other recent studies indicating that disagreement is not a valid proxy for uncertainty. In addition, we fi nd no correspondence between movements in uncertainty and predictive accuracy, suggesting that time-varying conditional variance estimates may not provide a reliable proxy for uncertainty. Last, using a regression equation that can be interpreted as a (G)ARCH-M-type model, we fi nd limited evidence of linkages between uncertainty and levels of infl ation and output growth.

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“…It is also worth noting that the real cost of financial volatility is not necessarily limited to the risk of crises. As discussed by Bloom et al (2014) for instance, firms may become more cautious in investing and hiring when financial uncertainty increases. It may also hamper the economy's ability to reallocate resources following shocks.…”

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confidence: 99%

Reserve Requirements and Loan Loss Provisions as Countercyclical Macroprudential Instruments: A Perspective from Latin America

Silva¹,

Agénor²

2016

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work is licensed under a Creative Commons IGO 3.0 AttributionNonCommercial-NoDerivatives (CC-IGO BY-NC-ND 3.0 IGO) license (http://creativecommons.org/licenses/by-nc-nd/3.0/igo/ legalcode) and may be reproduced with attribution to the IDB and for any non-commercial purpose. No derivative work is allowed.Any dispute related to the use of the works of the IDB that cannot be settled amicably shall be submitted to arbitration pursuant to the UNCITRAL rules. The use of the IDB's name for any purpose other than for attribution, and the use of IDB's logo shall be subject to a separate written license agreement between the IDB and the user and is not authorized as part of this CC-IGO license.Note that link provided above includes additional terms and conditions of the license.The opinions expressed in this publication are those of the authors and do not necessarily reflect the views of the Inter-American Development Bank, its Board of Directors, or the countries they represent.http://www.iadb.org 2016 Abstract * This paper discusses, from an analytical and operational perspective, the use of reserve requirements and loan loss provisions as countercyclical macroprudential instruments. In recent years both of these instruments have been used extensively in Latin America and elsewhere in the world. The first part of the paper sets the stage with a discussion of the rationale, in the presence of financial frictions, for using macroprudential regulation to mitigate financial system procyclicality. The second part reviews the general arguments, as well as the recent empirical evidence for Latin America, associated with the use of reserve requirements and loan loss provisions. The third part provides a normative analysis of the ways through which countercyclical reserve requirements and cyclically adjusted (or, more commonly called, dynamic) provisioning rules should be formulated, independently and jointly, to address concerns arising from procyclicality and financial volatility. Optimal countercyclical rules are discussed from the perspective of how these rules can either minimize a composite measure of economic volatility (combining measures of both macroeconomic and financial volatility) or maximize social welfare. The last part brings together the lessons for policymakers that can be drawn from the analysis. JEL classifications: E51, E58, G28

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Really Uncertain Business Cycles

Cited by 449 publications

References 81 publications

Market capitalization and Value-at-Risk

Market capitalization and Value-at-Risk

The Measurement and Behavior of Uncertainty: Evidence from the ECB Survey of Professional Forecasters

Reserve Requirements and Loan Loss Provisions as Countercyclical Macroprudential Instruments: A Perspective from Latin America

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