Uncertainty shocks in Brazil lead to economic downturn and increased debt.
The article examines how uncertainty shocks impact the Brazilian economy. By using a general equilibrium model, the researchers identified how these shocks affect different aspects of the economy. They found that increased volatility leads to lower consumption, investment, and output, as well as higher labor supply and external debt. Uncertainty shocks play a significant role in explaining economic activity in Brazil. The researchers also tested different scenarios and found that the results were consistent across various calibrations.