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Global Uncertainty

Giovanni Caggiano and Efrem Castelnuovo

No 2021-12, Monash Economics Working Papers from Monash University, Department of Economics

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 a GFU shock, the larger the world output contraction is.

Keywords: Global Financial Uncertainty; dynamic hierarchical factor model; structural VAR; world output loss; global Önance uncertainty multiplier. (search for similar items in EconPapers)
JEL-codes: C32 (search for similar items in EconPapers)
Date: 2021-10
New Economics Papers: this item is included in nep-cwa and nep-ifn
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Related works:
Working Paper: Global Uncertainty (2021) Downloads
Working Paper: Global uncertainty (2021) Downloads
Working Paper: GLOBAL UNCERTAINTY (2021) Downloads
Working Paper: Global uncertainty (2021) Downloads
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