Economics at your fingertips  

The impact of uncertainty on the macro-financial linkage with international financial exposure

Maria Teresa Punzi ()

Journal of Economics and Business, 2020, vol. 110, issue C

Abstract: This paper investigates the international transmission of various sources of uncertainty between the financial sector and the real economy. I focus on calibrating a two-country DGSE model with an international financial exposure in the banking sector for the Euro Area (EA) and the United States (US). In particular, the model studies the transmission mechanism of macroeconomic, monetary policy, financial and stock market volatility uncertainty. The model assumes that uncertainty originates in the foreign economy (US), and studies the spillover effect to the domestic economy (EA). The international transmission mechanism is driven by the international financial exposures, where domestic banks hold foreign banks’ assets as a second market activity. The analysis suggests that the spillover effects from foreign uncertainty have in many cases a sizeable and persistent impact on output, lending and asset prices. In particular, I find that macroeconomic and monetary policy uncertainty drive a global business cycle, where uncertainty leads to a drop in home and foreign GDP.

Keywords: DSGE model; Uncertainty; Financial frictions; International financial exposure; Macroprudential policy (search for similar items in EconPapers)
JEL-codes: C13 E32 E44 E52 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.jeconbus.2020.105894

Access Statistics for this article

Journal of Economics and Business is currently edited by Emanuele Bajo and Moritz Ritter

More articles in Journal of Economics and Business from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

Page updated 2023-01-17
Handle: RePEc:eee:jebusi:v:110:y:2020:i:c:s0148619519300918