Data and Code for: A Simple Explanation of Countercyclical Uncertainty

This paper documents that labor search and matching frictions generate countercyclical uncertainty because the inherent nonlinearity in the flow of new matches makes employment uncertainty increasing in the number of people searching for work. Quantitatively, this mechanism is strong enough to explain uncertainty and real activity dynamics, including their correlation. Through this lens, uncertainty fluctuations are endogenous responses to changes in real activity that neither affect the severity of business cycles nor warrant policy intervention, in contrast with leading theories of the interaction between uncertainty and real activity dynamics.<br>We provide MATLAB programs (in Code) to transform and detrend data (in Data, which is obtained via Haver Analytics, the authors own calculations, and others), and to solve and simulate models presented in the manuscript. replication.m (with a 92 minute runtime) produces all figures and tables in the manuscript and its online appendix.<br><br><br><br>