The Unassuming Economist

Since the global financial crisis, productivity growth has been weak and there have been bouts of heightened uncertainty. My new paper shows that, historically, increases in aggregate uncertainty have reduced productivity growth in industries. The impact is stronger in industries that depend heavily on external finance. This effect is also larger during recessions, when financing constraints are more likely to be binding. These findings suggest that counter-cyclical macro policies can have beneficial impacts on productivity growth during uncertain times (which corroborates conclusions reached by Philippe Aghion and co-authors in a recent set of papers) as well as policies aimed at addressing weak corporate balance sheets. My paper is co-authored with Sam Choi, Davide Furceri and Yi Huang and is available here.