Ivan Alfaro

Alfaro, Iván; Bloom, Nicholas & Lin, Xiaoji (2023)

The Finance Uncertainty Multiplier

132(2) , s. 577- 615. Doi: https://doi.org/10.1086/726230 - Full text in research archive

We show how real and financial frictions amplify, prolong and propagate thenegative impact of uncertainty shocks. We first use a novel instrumentation strategy toaddress endogeneity in estimating the impact of uncertainty by exploiting differentialfirm exposure to exchange rate, policy, and energy price volatility in a panel of USfirms. Using common proxies for financial constraints we show that ex-ante financiallyconstrained firms cut their investment even more than unconstrained firms following anuncertainty shock. We then build a general equilibrium heterogeneous firms model withreal and financial frictions, finding financial frictions: i)amplifyuncertainty shocks bydoubling their impact on output; ii) increasepersistenceby extending the duration ofthe drop by 50%; and iii)propagateuncertainty shocks by spreading their impact ontofinancial variables. These results highlight why in periods of greater financial frictionsuncertainty can be particularly damaging.

Alfaro, Iván & Park, Hoonsuk (2020)

Firm Uncertainty and Household Spending

[Conference Lecture]. Event

Alfaro, Iván & Park, Hoonsuk (2020)

Firm Uncertainty and Household Spending

[Conference Lecture]. Event

Alfaro, Iván; Lin, Xiaoji & Bloom, Nicholas (2020)

The Finance Uncertainty Multiplier

[Conference Lecture]. Event

Alfaro, Iván & Park, Hoonsuk (2020)

Firm Uncertainty and Household Spending

[Conference Lecture]. Event

Alfaro, Iván & Park, Hoonsuk (2020)

Firm Uncertainty and Household Spending

[Conference Lecture]. Event