Which External Shock Matters in Small Open Economies? US Economic Policy Uncertainty vs. Global Risk Aversion
Youngju Kim () and
Hyunjoon Lim ()
Additional contact information
Youngju Kim: Economic Research Institute, The Bank of Korea
Hyunjoon Lim: Economic Research Institute, The Bank of Korea
No 2018-29, Working Papers from Economic Research Institute, Bank of Korea
We investigate the relative roles of US economic policy uncertainty and global risk aversion in contributing to financial and macroeconomic fluctuations in small open economies (SOEs) using a panel of forty SOEs that includes both advanced economies (AEs) and emerging markets economies (EMEs). We find that SOEs¡¯ financial and real economic activities respond smoothly and persistently to US policy uncertainty shocks, consistent with Bloom et al. (2018), while exhibiting relatively short-lived and robust reactions to US risk aversion shocks. 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: Economic Policy Uncertainty; Risk Aversion; Spillovers; Small Open Economies (search for similar items in EconPapers)
JEL-codes: F21 F32 F42 (search for similar items in EconPapers)
Pages: 66 pages
New Economics Papers: this item is included in nep-opm and nep-upt
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed
Downloads: (external link)
http://papers.bok.or.kr/RePEc_attach/wpaper/english/wp-2018-29.pdf Working Paper, 2018 (application/pdf)
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:bok:wpaper:1829
Access Statistics for this paper
More papers in Working Papers from Economic Research Institute, Bank of Korea Contact information at EDIRC.
Bibliographic data for series maintained by Economic Research Institute ().