International Spill-Overs of Uncertainty Shocks: Evidence from a FAVAR

35 Pages Posted: 6 Oct 2016

See all articles by Güneş Kamber

Güneş Kamber

Bank for International Settlements (BIS) - Monetary and Economic Department

Özer Karagedikli

Reserve Bank of New Zealand

Michael Ryan

Sapere Research Group

Tugru l Vehbi

Reserve Bank of New Zealand

Date Written: October 4, 2016

Abstract

This paper analyses the international spill-overs of uncertainty shocks originating in the US. We estimate an open economy, structural factor-augmented vector autoregression (FAVAR) model that identifies US uncertainty shocks and estimates the impact of these uncertainty shocks on the US economy, major world economies and a small open economy, namely New Zealand. The data-rich nature of our model allows us to investigate different transmission channels from the US to the rest of the world. We find the confidence channels, measured by the expectations surveys, are particularly important in the transmission of the uncertainty shock to a small open economy.

Keywords: FAVAR, uncertainty shocks, small open economy

JEL Classification: C15, C32, E32

Suggested Citation

Kamber, Gunes and Karagedikli, Ozer and Ryan, Michael and l Vehbi, Tugru, International Spill-Overs of Uncertainty Shocks: Evidence from a FAVAR (October 4, 2016). CAMA Working Paper No. 61/2016 . Available at SSRN: https://ssrn.com/abstract=2848034 or http://dx.doi.org/10.2139/ssrn.2848034

Gunes Kamber

Bank for International Settlements (BIS) - Monetary and Economic Department ( email )

Centralbahnplatz 2
CH-4002 Basel
Switzerland

Ozer Karagedikli

Reserve Bank of New Zealand ( email )

2 The Terrace
P.O. Box 2498
Wellington, 6011
New Zealand
64 4-471-3792 (Phone)
64 4-473-1209 (Fax)

Michael Ryan

Sapere Research Group ( email )

203 Queen St
Auckland
New Zealand

Tugru L Vehbi (Contact Author)

Reserve Bank of New Zealand ( email )

2 The Terrace
PO Box 2498
Wellington, 6140
New Zealand

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