Shock (economics)

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In economics, a shock is an unexpected or unpredictable event that affects an economy, either positively or negatively. Technically, it is an unpredictable change in exogenous factors—that is, factors unexplained by an economic model—which may influence endogenous economic variables.

The response of economic variables, such as GDP and employment, at the time of the shock and at subsequent times, is measured by an impulse response function.^[1]