The global effects of global risk and uncertainty

Dario Bonciani and Martino Ricci

No 2179, Working Paper Series from European Central Bank

Abstract: In this paper, we analyse the effects of a shock to global financial uncertainty and risk aversion on real economic activity. To this end, we extract a global factor, which explains approximately 40% of the variance of about 1000 risky asset returns from around the world. We then study how shocks to the factor affect economic activity in 36 advanced and emerging small open economies by estimating local projections in a panel regression framework. We find the output responses to be quite heterogeneous across countries but, in general, negative and persistent. Furthermore, the effects of shocks to the global factor are stronger in countries with a higher degree of trade and/or financial openness, as well as in countries with higher levels of external debt, less developed financial sectors, and higher risk rating. JEL Classification: C30, F41, E32, F65

Keywords: global financial cycle; local projection; macroeconomic transmission; panel data (search for similar items in EconPapers)
Date: 2018-09
New Economics Papers: this item is included in nep-fdg, nep-opm and nep-rmg
Note: 2685107
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

Downloads: (external link)
https://www.ecb.europa.eu//pub/pdf/scpwps/ecb.wp2179.en.pdf (application/pdf)

Related works:
Working Paper: The global effects of global risk and uncertainty (2020)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20182179

Access Statistics for this paper

More papers in Working Paper Series from European Central Bank 60640 Frankfurt am Main, Germany. Contact information at EDIRC.
Bibliographic data for series maintained by Official Publications ().