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Assessing International Commonality in Macroeconomic Uncertainty and Its Effects

Andrea Carriero, Todd Clark and Massimiliano Marcellino

No 201803R, Working Papers from Federal Reserve Bank of Cleveland

Abstract: This paper uses a large vector autoregression to measure international macroeconomic uncertainty and its effects on major economies. We provide evidence of significant commonality in macroeconomic volatility, with one common factor driving strong comovement across economies and variables. We measure uncertainty and its effects with a large model in which the error volatilities feature a factor structure containing time-varying global components and idiosyncratic components. Global uncertainty contemporaneously affects both the levels and volatilities of the included variables. Our new estimates of international macroeconomic uncertainty indicate that surprise increases in uncertainty reduce output and stock prices, adversely affect labor market conditions, and in some economies lead to an easing of monetary policy.

Keywords: Bayesian Methods; Stochastic Volatility; Identifcation; Endogeneity; Uncertainty (search for similar items in EconPapers)
JEL-codes: C11 C32 D81 E32 (search for similar items in EconPapers)
Pages: 40 pages
Date: 2019-09-05
New Economics Papers: this item is included in nep-ecm, nep-ifn, nep-mac and nep-ore
Note: First version March 2018
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https://doi.org/10.26509/frbc-wp-201803r Full text (text/html)

Related works:
Journal Article: Assessing international commonality in macroeconomic uncertainty and its effects (2020) Downloads
Working Paper: Assessing International Commonality in Macroeconomic Uncertainty and Its Effects (2019) Downloads
Working Paper: Assessing International Commonality in Macroeconomic Uncertainty and Its Effects (2018) Downloads
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DOI: 10.26509/frbc-wp-201803r

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