Global Uncertainty, Shocks, and Macroeconomic Performance: The Cases of Indonesia, Malaysia, the Philippines, and Thailand

Abstract

This paper examines how global uncertainty and domestic shocks (domestic uncertainty) affect macroeconomic performance, such as household consumption expenditure, gross fixed capital formation, and goods and services exports, in Indonesia, Malaysia, the Philippines, and Thailand. The Global Economic Policy Uncertainty Index (GEPUI) is used for the global uncertainty measure, and the difference between the growth rate of original GDP series and their trend is considered a proxy of domestic shocks in this paper. According to the empirical analysis on the basis of time-series data, our interesting finding is that while negative domestic shocks generally tend to decrease macroeconomic performance in the aforementioned countries, increased global uncertainty has an adverse effect on growth of goods and services exports solely in Malaysia. We also conjectures this reason from the fact that the export structure of Malaysia depends heavily upon electrical machinery, apparatus, and appliances (i.e. semiconductor devices and integrated
circuits) production which is incorporated deeply into production networks developed in the world.

Keywords: Uncertainty; Shocks; Macroeconomic Performance; Production Networks

JEL Classification: E20; E32