  Can uncertainty about credit availability trigger a slowdown in real
activity? This question is answered by using a novel method to identify shocks
to uncertainty in access to credit. Time-variation in uncertainty about credit
availability is estimated using particle Markov Chain Monte Carlo. We extract
shocks to time-varying credit uncertainty and decompose it into two parts: the
first captures the "pure" effect of a shock to the second moment; the second
captures total effects of uncertainty including effects on the first moment.
Using state-dependent local projections, we find that the "pure" effect by
itself generates a sharp slowdown in real activity and the effects are largely
countercyclical. We feed the estimated shocks into a flexible price real
business cycle model with a collateral constraint and show that when the
collateral constraint binds, an uncertainty shock about credit access is
recessionary leading to a simultaneous decline in consumption, investment, and
output.
