 The impact of uncertainty shocks in emerging economiesYan Carrière-Swallow and Luis Cespedes Journal of International Economics, 2013, vol. 90, issue 2, 316-325 Abstract: A recent strand of research proposes that sudden jumps in uncertainty generate rapid drops and recoveries in real macroeconomic variables that drive the business cycle. Using an empirical model, we find substantial heterogeneity in reactions to these shocks across countries. In comparison to the U.S. and other developed countries, emerging economies suffer much more severe falls in investment and private consumption following an exogenous uncertainty shock, take significantly longer to recover, and do not experience a subsequent overshoot in activity. We provide evidence that the dynamics of investment and consumption are correlated with the depth of financial markets. We control for the potential role of a credit channel, and estimate that it can account for up to one-half of the increased fall in investment generated by uncertainty shocks among emerging economies with less-developed financial markets. In this context, monetary and fiscal policy actions that alleviate the impact of credit constraints facing firms may reduce the impact of uncertainty shocks in these economies. Keywords: Uncertainty; Emerging markets; Credit; Vector autoregression (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:inecon:v:90:y:2013:i:2:p:316-325 DOI: 10.1016/j.jinteco.2013.03.003 Access Statistics for this article Journal of International Economics is currently edited by Gourinchas, Pierre-Olivier and RodrÃguez-Clare, Andrés More articles in Journal of International Economics from Elsevier |
Is your work missing from RePEc? Here is how to contribute.
Questions or problems? Check the EconPapers FAQ or send mail to .
EconPapers is hosted by the
School of Business at Örebro University.