Uncertainty and employment dynamics in the euro area and the US

Aleksei Netésunajev and Katharina Glass

No 2016-002, SFB 649 Discussion Papers from Humboldt University Berlin, Collaborative Research Center 649: Economic Risk

Abstract: In this paper we investigate transmission and spillovers of local and foreign economic policy uncertainty shocks to unemployment in two largest economic regions in the world - the United States (US) and the Euro area (EA). For this purpose we deploy Bayesian Markov-switching structural vector autoregressive (MS-SVAR) model identified via heteroskedasticity. In addition to local effects we find foreign uncertainty shocks influence the Euro area but not the US unemployment. Moreover we document weaker spillovers of both local and foreign uncertainty shocks in the more volatile times.

Keywords: economic policy uncertainty; EPU index; unemployment; Markov-switching; structural vector autoregression; identification via heteroskedasticity; Bayesian inference (search for similar items in EconPapers)
JEL-codes: C11 C32 D80 E24 (search for similar items in EconPapers)
Date: 2016
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Journal Article: Uncertainty and employment dynamics in the euro area and the US (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:sfb649:sfb649dp2016-002

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