The timing of uncertainty shocks in a small open economy

Hanna Armelius, Isaiah Hull and Hanna Stenbacka Köhler
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Hanna Stenbacka Köhler: Monetary Policy Department, Central Bank of Sweden, Postal: Sveriges Riksbank, SE-103 37 Stockholm, Sweden

No 334, Working Paper Series from Sveriges Riksbank (Central Bank of Sweden)

Abstract: Foreign measures of uncertainty, such as the US EPU index, are often used as a proxies for domestic uncertainty in small open economies. We construct an EPU index for Sweden and demonstrate that shocks to the domestic index yield di erent impulse response functions for GDP growth than shocks to the US index. In particular, a one standard deviation shock to the Swedish index delivers its maximum impact in the same quarter, lowering GDP growth by 0.2 percentage points. In contrast, a shock to the US index delivers its maximum impact with a one-quarter delay. Other foreign proxies, such as the EU and German indices, also generate e ects that peak with a one-quarter delay.

Keywords: economic uncertainty; policy uncertainty; business cycles; small open economy (search for similar items in EconPapers)
JEL-codes: D80 E66 F41 F42 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2016-12-01
New Economics Papers: this item is included in nep-eec, nep-mac and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The timing of uncertainty shocks in a small open economy (2017)
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Persistent link: https://EconPapers.repec.org/RePEc:hhs:rbnkwp:0334

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