We show how real and financial frictions amplify, prolong and propagate the impact of uncertainty shocks. We first use a novel instrumentation strategy to address endogeneity in estimating the impact of uncertainty, by exploiting differential firm exposure to exchange rate, policy, treasury, and...

We use novel data on firm-level attention to characterize firms’ exposures to uncertainty. Our data captures a daily cross-section of firm-employee reading across thousands of topics. We use natural language processing tools to assess the types of topics firms are reading and show that firms...

We examine how policy uncertainty affects firm innovation and competitive dynamism. In R&D races, the gap in the rate of innovation, rather than the absolute rate, determines the winner. As a result, periods of depressed innovation and investment from policy uncertainty present an opportune...

We revisit the evidence on real effects of uncertainty shocks in the context of interest rate uncertainty, which can be hedged in the swap market. We document that adverse movements in interest rate uncertainty predict significant slowdowns in real activity, at the aggregate and at the...

We study the macroeconomic consequences of financial market concentration in a complete markets economy with production. We propose a theory in which differences in preferences, productivity, and risk exposure generate gains from trade, but these gains are not fully realized because some large...

We study the effects of financial uncertainty on investment dynamics in the U.S. using a vector autoregression with drifting parameters and stochastic volatilities. We find time-varying negative effects of financial uncertainty shocks on investment. These effects have declined in the post-WWII...

This paper investigates how cross-sectional micro-uncertainty influences the investment of small and large firms and discusses the aggregate implications of the heterogeneity in their investment decisions. Empirically, we find that large firms show less investment decline in times of heightened...

The interest rate is generally considered as an important driver of macroeconomic investment. As an innovation, this paper derives the exact shape of the "hysteretic" impact of changes in the interest rate on macroeconomic investment under the scenarios of both certainty and uncertainty. We...

The interest rate is generally considered as an important driver of macroeconomic investment. As an innovation, this paper derives the exact shape of the "hysteretic" impact of changes in the interest rate on macroeconomic investment under the scenarios of both certainty and uncertainty. We...

We add agency costs as in Carlstrom and Fuerst (1997) into a two-country, two-good international business-cycle model. In our model, changes in the relative price of investment arise endogenously. Despite the fact that technology shocks are uncorrelated across countries, the relative price of...