Business School for helpful comments and suggestions. An earlier version of this paper circulated with the title "Pricing Macroeconomic Uncertainty." The views expressed herein are those of the authors and do not necessarily reflect the views of the National Bureau of Economic Research. NBER working papers are circulated for discussion and comment purposes. They have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.

We estimate a production‐based general equilibrium model featuring demand‐ and supply‐side uncertainty and an endogenous term premium. Using term structure and macroeconomic data, we find sizable effects of uncertainty on risk premia and business cycle fluctuations. Both demand‐ and supply‐side uncertainty imply large contractions in real activity and an increase in term premia, but supply‐side uncertainty has larger effects on inflation and investment. We introduce a novel analytical decomposition to illustrate how multiple distinct endogenous risk wedges account for these differences. Supply and demand uncertainty are strongly correlated in the beginning of our sample, but decouple after the Great Recession.