We estimate a quantile structural vector autoregressive model for the Euro area to assess the real effects of uncertainty
shocks in expansions and recessions using monthly data covering the period of February 1999 to May 2016. Domestic and foreign
(US) uncertainty shocks hitting during recessions are found to produce a relatively overall stronger negative impact on output
growth than in expansions, with US shocks having more pronounced effects. Inflation, in general, is unaffected from a statistical
perspective. Our results tend to suggest that policy-makers need to implement state-dependent policies, with stimulous policies
being more aggressive during recessions – something we see from our results in terms of stronger declines in the interest
rate during bad times.
