In this paper we investigate the effects of oil price uncertainty and its asymmetry on real economic activity in the United States, in the context of a general bivariate framework in which a vector autoregression is modified to accommodate GARCH-inMean errors, as detailed in Engle and Kroner (1995), Grier et al. (2004), andShields et al. (2005). The model allows for the possibilities of spillovers and asymmetries in the variance-covariance structure for real output growth and the change in the real price of oil. Our measure of oil price uncertainty is the conditional variance of the oil price change forecast error. We isolate the effects of volatility in the change in the price of oil and its asymmetry on output growth and, following Koop et al. (1996), Hafner andHerwartz (2006), andvan Dijk et al. (2007), we employ simulation methods to calculate Generalized Impulse Response Functions (GIRFs) and Volatility Impulse Response Functions (VIRFs) to trace the effects of independent shocks on the conditional means and the conditional variances, respectively, of the variables.JEL classification: E32, C32.

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In this paper we investigate the relationship between money growth uncertainty and the level of economic activity in the United States. We pay explicit attention to the Divisia monetary aggregates. In doing so, we use the new vintage of the data [called MSI (monetary services indices) by the St. Louis Fed], together with the simple sum monetary aggregates, over the period from 1967:1 to 2011:3. In the context of a bivariate VARMA, GARCH-in-mean, asymmetric BEKK model, we show that increased Divisia money growth volatility (irrespective of the level of aggregation and the method of calculation) is associated with a lower average growth rate of real economic activity. However, there are no effects of simple-sum money growth volatility on real economic activity, except with the Sum M1 and perhaps Sum M2M aggregates. We conclude that monetary policies that focus on the Divisia monetary aggregates and target their growth rates will contribute to higher overall economic growth.