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Implications of Macroeconomic Volatility in the Euro Area

Niko Hauzenberger (), Maximilian Böck, Michael Pfarrhofer (), Anna Stelzer () and Gregor Zens ()
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Niko Hauzenberger: Department of Economics, Vienna University of Economics and Business
Michael Pfarrhofer: Department of Economics, Vienna University of Economics and Business
Anna Stelzer: Department of Economics, Vienna University of Economics and Business
Gregor Zens: Department of Economics, Vienna University of Economics and Business

Department of Economics Working Papers from Vienna University of Economics and Business, Department of Economics

Abstract: In this paper, we estimate a Bayesian vector autoregressive (VAR) model with factor stochastic volatility in the error term to assess the effects of an uncertainty shock in the Euro area (EA). This allows us to incorporate uncertainty directly into the econometric framework and treat it as a latent quantity. Only a limited number of papers estimates impacts of uncertainty and macroeconomic consequences jointly, and most literature in this sphere is based on single countries. We analyze the special case of a shock restricted to the Euro area, whose countries are highly related by definition. Among other variables, we find significant results of a decrease in real activity measured by GDP in most Euro area countries over a period of roughly a year following an uncertainty shock.

Keywords: vector autoregressive models; factor stochastic volatility; uncertainty shocks (search for similar items in EconPapers)
JEL-codes: C30 F41 E32 (search for similar items in EconPapers)
Date: 2018-04
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Related works:
Working Paper: Implications of macroeconomic volatility in the Euro area (2018) Downloads
Working Paper: Implications of macroeconomic volatility in the Euro area (2018) Downloads
Working Paper: Implications of Macroeconomic Volatility in the Euro Area (2018) Downloads
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