Global uncertainty

Giovanni Caggiano and Efrem Castelnuovo

No 1/2021, Bank of Finland Research Discussion Papers from Bank of Finland

Abstract: We estimate a novel measure of global Önancial uncertainty (GFU) with a dynamic factor framework that jointly models global, regional, and country-speciÖc factors. We quantify the impact of GFU shocks on global output with a VAR analysis that achieves set-identiÖcation via a combination of narrative, sign, ratio, and correlation restrictions. We Önd that the world output loss that materialized during the great recession would have been 13% lower in absence of GFU shocks. We also unveil the existence of a global Önance uncertainty multiplier: the more global Önancial conditions deteriorate after GFU shocks, the larger the world output contraction is.

Keywords: Global Financial Uncertainty; dynamic hierarchical factor model; structural VAR; world output loss; global finance uncertainty multiplier (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Date: 2021
New Economics Papers: this item is included in nep-int and nep-opm
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Citations: View citations in EconPapers (2)

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https://www.econstor.eu/bitstream/10419/240342/1/BoF-DP-2101.pdf (application/pdf)

Related works:
Working Paper: Global Uncertainty (2021)
Working Paper: Global uncertainty (2021)
Working Paper: Global Uncertainty (2021)
Working Paper: GLOBAL UNCERTAINTY (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:bofrdp:rdp2021_001

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