Global uncertainty

Giovanni Caggiano and Efrem Castelnuovo

CAMA Working Papers from Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University

Abstract: We estimate a novel measure of global financial uncertainty (GFU) with a dynamic factor framework that jointly models global, regional, and country-specific factors. We quantify the impact of GFU shocks on global output with a VAR analysis that achieves set-identification via a combination of narrative, sign, ratio, and correlation restrictions. We find that the world output loss that materialized during the great recession would have been 13% lower in absence of GFU shocks. We also unveil the existence of a global finance uncertainty multiplier: the more global financial conditions deteriorate after GFU shocks, the larger the world output contraction is.

Keywords: Global Financial Uncertainty; dynamic hierarchical factor model; structural VAR; world output loss; global finance uncertainty multiplier. (search for similar items in EconPapers)
JEL-codes: C32 E32 (search for similar items in EconPapers)
Pages: 59 pages
Date: 2021-02
New Economics Papers: this item is included in nep-cwa, nep-fdg, nep-ifn and nep-mac
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https://cama.crawford.anu.edu.au/sites/default/fil ... iano_castelnuovo.pdf (application/pdf)

Related works:
Working Paper: Global Uncertainty (2021)
Working Paper: Global Uncertainty (2021)
Working Paper: GLOBAL UNCERTAINTY (2021)
Working Paper: Global uncertainty (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:een:camaaa:2021-21

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