Uncertainty, Financial Markets, and Monetary Policy over the Last Century

Abstract What has been the effect of uncertainty shocks in U.S. economy over last century? are roles financial channel and monetary policy propagating shocks? Our empirical strategies enable us to distinguish between effects on key macroeconomic variables transmitted through each channel. A hundred years data further allow answer these questions from a novel historical perspective. This paper finds robust evidence that conditions captured by both borrowing costs availability credit have played crucial role century. However, heightened does not necessarily amplify adverse shocks, suggesting an asymmetric interaction shocks. Interestingly, stance seems play only minor which is sharp contrast recent claim binding zero-lower-bound amplifies negative We argue contribution constrained amplifying largely masked joint concurrence tightened conditions.