This paper builds a model to show how increases in aggregate uncertainty an uncertainty shock can generate recessions. Uncertainty shocks in the model are able to both account for a significant portion of business cycle fluctuations observed in data and generate positive comovements between output, consumption, investment, and hours. The key assumption of the model is that firm managers endogen...

Uncertainty about the coordination of common efforts (e.g. team projects, alliances) often coexists with uncertainty about other variables (e.g. weather, market fluctuations, political instability). In certain coordination games in which equilibria can potentially arise at any common effort level, ex ante equilibrium selection (particularly of high-effort, high-payoff equilibria) has been a per...

This paper analyzes optimal wage contracting assuming agents are not subjective expected utility maximizers but are, instead, ambiguity (or uncertainty) averse decision makers who maximize Choquet expected utility. We show that such agents will choose not to include any indexation coverage in their wage contracts even when inflation is uncertain, unless the perceived inflation uncertainty is hi...

Humans commonly face choices between multiple options with uncertain outcomes. Such situations occur in many contexts, from purely financial decisions (which shares should I buy?) to perceptuo-motor decisions between different actions (where should I aim my shot at goal?). Regardless of context, successful decision-making requires that the uncertainty at the heart of the decision-making problem...

Abstract The paper analyzes strategic behavior in a two-stage environmental choice problem under di¤erent information scenarios. Given uncertainty about environmental cost and irreversibility of development, “learning without destroying”emerges from strategic competition when information is endogenous and publicly available. This happens since agents trade o¤ the higher payo¤of being the …rst-m...

We introduce a model for uncertainty in the IS-LM linear macroeconomic model with exogenous parameters. An uncertainty profile U is a short and macroscopic description of an stressed situation. We use U to define a strategic game where two agents, the angel and the daemon, act selfishly and have different goals. Those Nash equilibria provide the stable strategies in stressed situations, giving ...

This paper considers the model predictive control of dynamic systems subject to stochastic uncertainties due to parametric uncertainties and exogenous disturbance. The effects of uncertainties are quantified using generalised polynomial chaos expansions with an additive Gaussian random process as the exogenous disturbance. With Gaussian approximation of the resulting solution trajectory of a st...

Banks increase cross-border syndicated lending when domestic economic policy uncertainty is high, after controlling for credit demand at the borrower country or country-industry levels. The migration effects are strongest banks with diverse income and face fiercer competition. Using elections as a source of plausibly exogenous variation which positively affects political uncertainty, we provide...

Exogenous uncertainty shocks may have different effects on domestic and foreign consumption under consumer confidence regimes. In this paper, we specify a threshold vector autoregressive (TVAR) model with regimes to study the response of endogenous macroeconomic variables exogenous shocks. The evidence shows that in China, compared high confidence, low dampens both at home abroad. However, bene...