The Impact of Uncertainty Shocks on the UK Economy

 
Author/Editor: Denis, Stephanie ; Kannan, Prakash
 
Publication Date: March 08, 2013
 
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Disclaimer: This Working Paper should not be reported as representing the views of the IMF. The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate
 
Summary: This paper quantifies the economic impact of uncertainty shocks in the UK using data that span the recent Great Recession. We find that uncertainty shocks have a significant impact on economic activity in the UK, depressing industrial production and GDP. The peak impact is felt fairly quickly at around 6-12 months after the shock, and becomes statistically negligible after 18 months. Interestingly, the impact of uncertainty shocks on industrial production in the UK is strikingly similar to that of the US both in terms of the shape and magnitude of the response. However, unemployment in the UK is less affected by uncertainty shocks. Finally, we find that uncertainty shocks can account for about a quarter of the decline in industrial production during the Great Recession.
 
Series: Working Paper No. 13/66
Subject(s): External shocks | United Kingdom | United States | Industrial production | Unemployment | Economic recession | Economic growth | Monetary policy

 
English
Publication Date: March 08, 2013
ISBN/ISSN: 9781475552690/2227-8885 Format: Paper
Stock No: WPIEA2013066 Pages: 24
Price:
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