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Uncertainty shocks in emerging economies

Mirela Miescu ()

No 277077821, Working Papers from Lancaster University Management School, Economics Department

Abstract: The paper investigates the effects of uncertainty shocks in emerging economies (EMEs). We construct a global uncertainty indicator as well as country uncertainty measures for fifteen relatively small emerging economies. We adopt an instrumental variable approach to identify exogenous uncertainty shocks in the EMEs. To deal with the data limitations specific to emerging countries, we develop a new Bayesian algorithm to estimate a proxy panel structural vector autoregressive (SVAR) model. We find that uncertainty shocks in EMEs cause severe falls in GDP and stock price indexes, generate inflation, depreciate the currency and are not followed by a subsequent overshoot in activity. Estimation implies considerable heterogeneity across economies in the response to uncertainty shocks which can be (in part) explained by country characteristics.

Keywords: Uncertainty shocks; proxy SVAR; Emerging economies; Panel data (search for similar items in EconPapers)
JEL-codes: C3 C11 E3 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ecm and nep-mac
Date: 2019
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Persistent link: https://EconPapers.repec.org/RePEc:lan:wpaper:277077821

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