Abstract

https://ssrn.com/abstract=2908591
 


 



The Impact of Global Uncertainty on the Global Economy, and Large Developed and Developing Economies


Wensheng Kang


Kent State University - Department of Economics

Ronald A. Ratti


Western Sydney University - Department of Economics & Finance

Joaquin L. Vespignani


University of Tasmania - School of Economics and Finance

January 30, 2017

CAMA Working Paper No. 9/2017

Abstract:     
Global uncertainty shocks are associated with a sharp decline in global inflation, global growth and in the global interest rate. Over 1981 to 2014 global financial uncertainty forecasts 18.26% and 14.95% of the variation in global growth and global inflation respectively. Global uncertainty shocks have more protracted, statistically significant and substantial effects on global growth, inflation and interest rate than U.S. uncertainty shocks. U.S. uncertainty lags global uncertainty by one month. When controlling for domestic uncertainty, the decline in output following a rise in global uncertainty is statistically significant in each country, with the exception of the decline for China. The effects for the U.S. and for China are also relatively small. For most economies, a positive shock to global uncertainty has a depressing effect on prices and official interest rates. Exceptions are Brazil, Mexico and Russia, economies with large capital outflows during financial crises. Decomposition of global uncertainty shocks shows that global financial uncertainty shocks are more important than non-financial shocks.

Number of Pages in PDF File: 47

Keywords: Global, Uncertainty Shocks, Monetary Policy, FAVAR

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


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Date posted: January 31, 2017  

Suggested Citation

Kang, Wensheng and Ratti, Ronald A. and Vespignani, Joaquin L., The Impact of Global Uncertainty on the Global Economy, and Large Developed and Developing Economies (January 30, 2017). CAMA Working Paper No. 9/2017 . Available at SSRN: https://ssrn.com/abstract=2908591 or http://dx.doi.org/10.2139/ssrn.2908591

Contact Information

Wensheng Kang
Kent State University - Department of Economics ( email )
Kent, OH 44242
United States
Ronald A. Ratti
Western Sydney University - Department of Economics & Finance ( email )
Sydney, NSW 1797
Australia
Joaquin L. Vespignani (Contact Author)
University of Tasmania - School of Economics and Finance ( email )
Commerce Building,
Sandy Bay Campus
Sandy Bay, TAS, Tasmania 7005
Australia
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