In this paper, we investigate the effects of uncertainty shocks on the US daily online price index by Cavallo and Rigobon (J Econ Perspect 30(2):151–78, 2016) within a VAR framework. We find evidence that shocks increasing uncertainty dampen prices significantly. This result is robust to various changes to the baseline model and rejects the Upward Pricing Bias that is often found in the Sticky-Price DSGE literature.
- Uncertainty shocks
- Daily online price index