Global Spillover Effects Of US Uncertainty

Saroj Bhattarai, Arpita Chatterjee and Woong Yong Park

Working Papers from Centre for Advanced Financial Research and Learning (CAFRAL)

Abstract: We study spillover effects of US uncertainty fluctuations using data from fifteen emerging market economies (EMEs) in a panel VAR framework. A US uncertainty shock negatively affects EME stock prices and exchange rates, raises EME country spreads, and leads to capital outflows from them. Moreover, it decreases EME output, while increasing their consumer prices and net exports. The negative effects on output, exchange rates, and stock prices are weaker, but the effects on capital and trade flows stronger, for South American countries compared to other EMEs. We present a model of a small open economy that faces an external shock to interpret our empirical findings. Theoretically and empirically, we link the heterogeneity in effects across the two groups of EMEs to their differential monetary policy response to the US uncertainty shock.

Keywords: US Uncertainty; Panel VAR; Emerging Market Economies; Monetary Policy Response (search for similar items in EconPapers)
JEL-codes: C11 C33 E44 E52 E58 F32 (search for similar items in EconPapers)
Pages: 62
Date: 2020-01
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Published in Journal of Monetary Economics

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Related works:
Journal Article: Global spillover effects of US uncertainty (2020)
Working Paper: Global Spillover Effects of US Uncertainty (2019)
Working Paper: Global Spillover Effects of US Uncertainty (2019)
Working Paper: Global Spillover Effects of US Uncertainty (2017)
Working Paper: Global Spillover Effects of US Uncertainty (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:ris:cafral:022299

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