Policy Uncertainty Shocks and Small Open Economies in Monetary Union: a Case Study of Ireland

Jonathan Rice

Economic Papers from Trinity College Dublin, Economics Department

Abstract: This paper explores the implications of policy uncertainty shocks for Ireland, a small open economy operating within monetary union. Exogenous domestic uncertainty shocks foreshadow persistent declines in Irish investment and employment, with no clear response by the ECB. On the other hand, no such decline in demand is observed following global uncertainty shocks, largely resulting from an accommodative monetary policy stance by the ECB. Results from this paper suggest that policy uncertainty shocks have negative and persistent effects on Irish real activity, only when monetary policy does not counteract these shocks. Common identification problems in the literature are also discussed and suggestions are made for future work in the area.

Keywords: Small Open Economy; Uncertainty; Investment; Consumption; Interest Rates; Monetary Policy. (search for similar items in EconPapers)
JEL-codes: E2 E3 E4 (search for similar items in EconPapers)
Pages: 22 pages
Date: 2020-01
New Economics Papers: this item is included in nep-cba, nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:tcd:tcduee:tep1020

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