Uncertainty, Macroeconomic Activity and Commodity Price: A Global Analysis
34 Pages Posted: 15 Nov 2018
Date Written: November 8, 2018
We extend Jurado et al. (2015)’s forecast-error-based uncertainty measure to the international context, and construct a new measure of global uncertainty. We examine dynamic causal effects among global uncertainty and other global macroeconomic variables, and provide two important applications of our global uncertainty measure by linking it to the price formation mechanism of oil and international uncertainty spillover effects. We show that the well-documented relation between uncertainty and real activities is not only a regional issue, but also a global phenomenon. Global uncertainty also plays a key role in determining commodity prices, as well as driving business cycle fluctuations in a certain economy.
Keywords: Uncertainty Shocks, International Economics, Commodity Price, Oil Price
JEL Classification: C32, E32, F44, O13
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