The evolving impact of global, region-specific and country-specific uncertainty

Haroon Mumtaz and Alberto Musso
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Haroon Mumtaz: Queen Mary University of London

No 866, Working Papers from Queen Mary University of London, School of Economics and Finance

Abstract: We develop a dynamic factor model with time-varying parameters and stochastic volatility, estimate it with several variables for a large number of countries and decompose the variance of each variable in terms of contributions from uncertainty common to all countries (global uncertainty), region-specific uncertainty and country-specific uncertainty. Among other findings, the estimates suggest that global uncertainty plays a primary role in explaining the volatility of inflation, interest rates and stock prices, although to a varying extent over time, while all uncertainty components are found to play a non-negligible role for real economic activity, credit and money for most countries.

Keywords: Dynamic Factor Model; Time-Varying Parameters; Stochastic Volatility; Uncertainty Shocks; Global Uncertainty (search for similar items in EconPapers)
JEL-codes: C15 C32 E32 (search for similar items in EconPapers)
Date: 2018-09-01
New Economics Papers: this item is included in nep-ets and nep-mac
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Citations: View citations in EconPapers (7)

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Working Paper: The evolving impact of global, region-specific and country-specific uncertainty (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:qmw:qmwecw:866

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