Uncertainty about the future rises in recessions. But is uncertainty a source of business cycles or an endogenous response to them, and does the type of uncertainty matter? To address these questions, we propose a novel shock-restricted identification strategy. We find that sharply higher...

This paper exploits a data rich environment to provide direct econometric estimates of time-varying macroeconomic uncertainty, defined as the common volatility in the unforecastable component of a large number of economic indicators. Our estimates display significant independent variations from...