 Which external shock matters in small open economies? Global risk aversion vs. US economic policy uncertaintyYoungju Kim, Hyunjoon Lim and Wook Sohn Japan and the World Economy, 2020, vol. 54, issue C Abstract: We investigate the roles of global risk aversion and US economic policy uncertainty in contributing to financial and macroeconomic fluctuations in small open economies (SOEs). We use a panel of forty SOEs that includes both advanced economies (AEs) and emerging markets economies (EMEs) to find that SOEs’ financial and economic activities exhibit relatively short-lived and robust reactions to risk aversion shocks, while responding smoothly and persistently to US policy uncertainty shocks, consistent with Bloom et al. (2018). A novel finding of this paper is that the responses of AEs and EMEs are asymmetric: AEs react more strongly to US policy uncertainty shocks while EMEs are more sensitive to risk aversion shocks. These results suggest that the channels through which each shock is transmitted to SOEs may vary. Keywords: Risk aversion; Economic policy uncertainty; Spillovers; Small open economies (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:japwor:v:54:y:2020:i:c:s0922142520300128 DOI: 10.1016/j.japwor.2020.101011 Access Statistics for this article Japan and the World Economy is currently edited by Robert Dekle and Yasushi Hamao More articles in Japan and the World Economy from Elsevier |
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