Financial markets are central to the transmission of uncertainty shocks. This paper documents a new aspect of the … interaction between the two by showing that uncertainty shocks have radically different macroeconomic implications depending on … uncertainty is proxied by the (unobserved) volatility of the structural shocks, and a regime change occurs whenever credit …

We study the link between financial conditions and uncertainty in emerging markets using a Bayesian Threshold-VAR with … stochastic volatility. In the model, uncertainty is measured as the time-varying volatility of the shocks. The macroeconomic … effects of uncertainty shocks are contingent on financial conditions. We find that sudden jumps in uncertainty tighten …