The impact of US uncertainty on the Euro area in good and bad times: evidence from a quantile structural vector autoregressive model

Rangan Gupta, Chi Keung Lau and Mark Wohar

Empirica, 2019, vol. 46, issue 2, No 6, 353-368

Abstract: Abstract We estimate a quantile structural vector autoregressive model for the Euro area to assess the real effects of uncertainty shocks in expansions and recessions using monthly data covering the period of 1999:02–2016:05. Domestic and foreign (US) uncertainty shocks hitting during recessions are found to produce a relatively overall stronger negative impact on output growth than in expansions, with US shocks having more pronounced effects. Inflation, in general, is unaffected from a statistical perspective. Our results tend to suggest that policymakers need to implement state-dependent policies, with stimulus policies being more aggressive during recessions—something we see from our results in terms of stronger declines in the interest rate during bad times.

Keywords: Economic policy uncertainty; US-Euro area spillovers; Quantile structural vector autoregressive model (search for similar items in EconPapers)
JEL-codes: C32 E32 E60 (search for similar items in EconPapers)
Date: 2019
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Citations: View citations in EconPapers (50)

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Working Paper: The Impact of US Uncertainty on the Euro Area in Good and Bad Times: Evidence from a Quantile Structural Vector Autoregressive Model (2016)
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DOI: 10.1007/s10663-018-9400-3

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