Uncertainty and Business Cycles: Exogenous Impulse or Endogenous Response?

Uncertainty about the future rises in recessions. But is uncertainty a source of business cycles or an endogenous response to them, and does type matter? We propose novel SVAR identification strategy address these questions via inequality constraints on structural shocks. find that sharply higher macroeconomic recessions often output shocks, while financial markets likely fluctuations. (JEL D81, E23, E32, E44, G14)