The Global Effects of Global Risk and Uncertainty

44 Pages Posted: 10 Oct 2018

See all articles by Dario Bonciani

Dario Bonciani

European University Institute

Martino Ricci

European Central Bank (ECB)

Date Written: September 25, 2018


In this paper, we analyse the effects of a shock to global financial uncertainty and risk aversion on real economic activity. To this end, we extract a global factor, which explains approximately 40% of the variance of about 1000 risky asset returns from around the world. We then study how shocks to the factor affect economic activity in 36 advanced and emerging small open economies by estimating local projections in a panel regression framework. We find the output responses to be quite heterogeneous across countries but, in general, negative and persistent. Furthermore, the effects of shocks to the global factor are stronger in countries with a higher degree of trade and/or financial openness, as well as in countries with higher levels of external debt, less developed financial sectors, and higher risk rating.

Keywords: Global Financial Cycle, Local Projection, Macroeconomic Transmission, Panel Data

JEL Classification: C30, F41, E32, F65

Suggested Citation

Bonciani, Dario and Ricci, Martino, The Global Effects of Global Risk and Uncertainty (September 25, 2018). ECB Working Paper No. 2179, Available at SSRN: or

Dario Bonciani (Contact Author)

European University Institute ( email )

Villa Schifanoia
133 via Bocaccio
Firenze (Florence), Tuscany 50014

Martino Ricci

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Abstract Views
PlumX Metrics