Term Structure of Uncertainty in the Macroeconomy

Jaroslav Borovicka, L. P. Hansen

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Abstract

    Dynamic economic models make predictions about impulse responses that characterize how macroeconomic processes respond to alternative shocks over different horizons. From the perspective of asset pricing, impulse responses quantify the exposure of macroeconomic processes and other cash flows to macroeconomic shocks. Financial markets provide compensations to investors who are exposed to these shocks. Adopting an asset pricing vantage point, we describe and apply methods for computing exposures to macroeconomic shocks and the implied compensations represented as elasticities over alternative payoff horizons. The outcome is a term structure of macroeconomic uncertainty.

    Original languageEnglish (US)
    Title of host publicationHandbook of Macroeconomics, 2016
    PublisherElsevier B.V.
    Pages1641-1696
    Number of pages56
    Volume2
    ISBN (Print)9780444594877
    DOIs
    StatePublished - 2016

    Publication series

    NameHandbook of Macroeconomics
    Volume2
    ISSN (Print)15740048

    Fingerprint

    Macroeconomic shocks
    Asset pricing
    Impulse response
    Term structure
    Macroeconomics
    Uncertainty
    Macroeconomy
    Elasticity
    Investors
    Cash flow
    Prediction
    Macroeconomic uncertainty
    Financial markets

    Keywords

    • Asset pricing
    • Financing frictions
    • Impulse response functions
    • Martingales
    • Shock elasticities

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Economics, Econometrics and Finance (miscellaneous)

    Cite this

    Borovicka, J., & Hansen, L. P. (2016). Term Structure of Uncertainty in the Macroeconomy. In Handbook of Macroeconomics, 2016 (Vol. 2, pp. 1641-1696). (Handbook of Macroeconomics; Vol. 2). Elsevier B.V.. https://doi.org/10.1016/bs.hesmac.2016.06.005

    Term Structure of Uncertainty in the Macroeconomy. / Borovicka, Jaroslav; Hansen, L. P.

    Handbook of Macroeconomics, 2016. Vol. 2 Elsevier B.V., 2016. p. 1641-1696 (Handbook of Macroeconomics; Vol. 2).

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Borovicka, J & Hansen, LP 2016, Term Structure of Uncertainty in the Macroeconomy. in Handbook of Macroeconomics, 2016. vol. 2, Handbook of Macroeconomics, vol. 2, Elsevier B.V., pp. 1641-1696. https://doi.org/10.1016/bs.hesmac.2016.06.005
    Borovicka J, Hansen LP. Term Structure of Uncertainty in the Macroeconomy. In Handbook of Macroeconomics, 2016. Vol. 2. Elsevier B.V. 2016. p. 1641-1696. (Handbook of Macroeconomics). https://doi.org/10.1016/bs.hesmac.2016.06.005
    Borovicka, Jaroslav ; Hansen, L. P. / Term Structure of Uncertainty in the Macroeconomy. Handbook of Macroeconomics, 2016. Vol. 2 Elsevier B.V., 2016. pp. 1641-1696 (Handbook of Macroeconomics).
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