EconPapers    
Economics at your fingertips  
 

Impact of uncertainty and exchange rate shocks: Theory and global empirics

Jing Lian Suah

Journal of Asian Economics, 2022, vol. 82, issue C

Abstract: This paper offers two points on the impact of uncertainty and exchange rate shocks. (1) A conceptual model where behavioural frictions – rational inattentiveness and bounded expectations – interact with uncertainty, generating aggregate fluctuations. Central banks can target these behavioural frictions to stabilise output and prices. (2) Empirical findings from a panel of advanced and emerging economies. Output and inflation slow in response to uncertainty shocks. Government bond yields moderate and exchange rates depreciate, suggesting within-country and between-country flight-to-safety respectively. Exchange rate appreciation shocks generate similar responses. The Malaysia-specific analysis finds divergent responses in employment and output, likely reflecting compositional effects in more productive tradable and less productive non-tradable sectors.

Keywords: Uncertainty; Rational inattention; Bounded rationality; VAR (search for similar items in EconPapers)
JEL-codes: E0 E7 (search for similar items in EconPapers)
Date: 2022
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1049007822000653
Full text for ScienceDirect subscribers only

Related works:
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:eee:asieco:v:82:y:2022:i:c:s1049007822000653

DOI: 10.1016/j.asieco.2022.101510

Access Statistics for this article

Journal of Asian Economics is currently edited by C. Wiemer

More articles in Journal of Asian Economics from Elsevier
Bibliographic data for series maintained by Catherine Liu (repec@elsevier.com).

 
Page updated 2024-12-28
Handle: RePEc:eee:asieco:v:82:y:2022:i:c:s1049007822000653