Fluctuations in Global Macro Volatility

Danilo Leiva-Leon () and Lorenzo Ductor

No 1925, Working Papers from Banco de España

Abstract: We rely on a hierarchical volatility factor approach to estimate and decompose time-varying second moments of countries output growth into global, regional and idiosyncratic contributions. We document a “global moderation” of international business cycles, defined as a persistent decline in macroeconomic volatility across the main world economies. This decline in volatility was induced by a reduction in the underlying global component, uncovering a new level of interconnection of the world economy. After assessing the importance of different economic factors, we find that the reduction in overall countries macroeconomic volatility can be mainly explained by the increasing trade openness exhibited in recent decades. Likewise, the idiosyncratic component of countries volatility is also influenced by domestic monetary policies.

Keywords: output volatility; factor model; model uncertainty (search for similar items in EconPapers)
JEL-codes: C11 C32 E32 F44 (search for similar items in EconPapers)
Pages: 73 pages
Date: 2019-07
New Economics Papers: this item is included in nep-mac, nep-opm and nep-ore
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: Fluctuations in Global Macro Volatility (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bde:wpaper:1925

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