Financial and Non-Financial Global Stock Market Volatility Shocks

14 Pages Posted: 13 Nov 2018

See all articles by Wensheng Kang

Wensheng Kang

Department of Economics, Kent State University

Ronald A. Ratti

Western Sydney University - Department of Economics & Finance

Joaquin Vespignani

University of Tasmania - School of Economics and Finance; Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA)

Date Written: November 13, 2018

Abstract

We decompose global stock market volatility shocks into financial originated shocks and non-financial originated shocks. Global stock market volatility shocks arising from financial sources reduce substantially more global outputs and inflation than non-financial sources shocks. Financial stock market volatility shocks forecasts 16.85% and 16.88% of the variation in global growth and inflation, respectively. In contrast, the non-financial stock market volatility shocks forecasts only 8.0% and 2.19% of the variation in global growth and inflation. Beside this markable difference global interest/policy rate responds similarly to both shocks.

Keywords: Global, Stock market volatility Shocks, Monetary Policy, FAVAR

JEL Classification: D80, E44, E66, F62, G10

Suggested Citation

Kang, Wensheng and Ratti, Ronald A. and Vespignani, Joaquin, Financial and Non-Financial Global Stock Market Volatility Shocks (November 13, 2018). CAMA Working Paper No. 58/2018, Available at SSRN: https://ssrn.com/abstract=3283417 or http://dx.doi.org/10.2139/ssrn.3283417

Wensheng Kang

Department of Economics, Kent State University ( email )

Kent, OH 44242
United States

Ronald A. Ratti

Western Sydney University - Department of Economics & Finance ( email )

Sydney, NSW 1797
Australia

Joaquin Vespignani (Contact Author)

University of Tasmania - School of Economics and Finance ( email )

Commerce Building,
Sandy Bay Campus
Sandy Bay, TAS, Tasmania 7005
Australia

Australian National University (ANU) - Centre for Applied Macroeconomic Analysis (CAMA) ( email )

ANU College of Business and Economics
Canberra, Australian Capital Territory 0200
Australia

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