The spillover effects of US economic policy uncertainty on the global economy: A global VAR approach
Nguyen Ba Trung
The North American Journal of Economics and Finance, 2019, vol. 48, issue C, 90-110
Uncertainty in general and, more specifically, policy uncertainty have increased substantially after the 2007–2008 global financial crisis. Much of policy uncertainty has stemmed from the US. In this paper, we examine how US policy uncertainty shock spills over to the rest of the world in a global VAR (GVAR) framework. We find that US policy uncertainty shocks are significant in driving the business cycle fluctuations of the world economy. However, the spillovers are heterogeneous across countries, which are determined by the different types of US policy uncertainty (e.g., monetary policy uncertainty versus fiscal policy uncertainty) and the receiving country’s characteristics (e.g., level of development, trade and financial openness, and quality of institutions). The empirical results offer crucial policy implications for both advanced and developing economies. Improving trade and financial openness and institutional quality can help them to mitigate their vulnerability to US policy uncertainty shock.
Keywords: Economic policy uncertainty; Spillover effects; Institutions; Trade and financial openness; Monetary policy uncertainty; Fiscal policy uncertainty (search for similar items in EconPapers)
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
Full text for ScienceDirect subscribers only
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:eee:ecofin:v:48:y:2019:i:c:p:90-110
Access Statistics for this article
The North American Journal of Economics and Finance is currently edited by Hamid Beladi
More articles in The North American Journal of Economics and Finance from Elsevier
Bibliographic data for series maintained by Dana Niculescu ().