 Is uncertainty the same everywhere? Advanced versus emerging economiesAbhishek Kumar, Sushanta Mallick () and Apra Sinha Economic Modelling, 2021, vol. 101, issue C Abstract: Considering the frequency of uncertainty shocks, this study examines various uncertainties across countries. Recent literature shows conflicting evidence on whether these uncertainties are supply- or demand-driven shocks. Using quarterly data from the United States and India, this study shows that although uncertainty shocks are demand shocks in advanced economies (e.g., the United States) with a contractionary output effect, they behave as supply shocks in emerging economies (e.g., India) with an inflationary effect. In contrast to the United States, asymmetry in India results from a high and positive correlation between uncertainty and oil price shocks. This study distinguishes between international and domestic uncertainty for India and finds a significant spillover of international uncertainty. Furthermore, the study shows that domestic uncertainty also relates to the primary sector, where rainfall emerges as a source of domestic uncertainty, thereby contributing to the inflationary effect. Therefore, uncertainty shocks influence monetary policy response differently. Keywords: Penalty function; India; Uncertainty; Inflation; SVAR; Supply shock; Demand shock (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:101:y:2021:i:c:s0264999321001139 DOI: 10.1016/j.econmod.2021.105524 Access Statistics for this article Economic Modelling is currently edited by S. Hall and P. Pauly More articles in Economic Modelling from Elsevier |
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