The Industrial Impact of Economic Uncertainty Shocks in Australia

52 Pages Posted: 20 Dec 2019

See all articles by Hamish Burrell

Hamish Burrell

Tasmanian School of Business and Economics, University of Tasmania

Joaquin Vespignani

University of Tasmania - School of Economics and Finance

Date Written: December 20, 2019

Abstract

This study establishes the first empirical evidence of the impact of economic uncertainty shocks on industry-level investment, output and employment in Australia. We find the Construction and Financial and Insurance Services industries are the most impacted by a shock to economic uncertainty. Statistically significant declines are observed for investment, output and employment in the Construction industry, and in terms of magnitude, the declines in output and employment are the largest across all industries studied. Likewise, the Financial and Insurance Services industry experiences declines across investment, output and employment, and undergoes the largest decline in investment in comparison to all other industries examined. Economic uncertainty explains the most substantial portion of the variation in Financial and Insurance Services investment and output, highlighting the detrimental effect it has on the Financial and Insurance Services industry. Furthermore, Health Care and Social Assistance output and Professional, Scientific and Technical Services investment experience considerable declines, and in contrast, Public Administration and Safety is shown to be the least impacted industry.

Keywords: Economic Uncertainty, Economic Uncertainty Shocks, SVAR, Australian economy, Australian Industries

JEL Classification: C10, C32, E00, E30

Suggested Citation

Burrell, Hamish and Vespignani, Joaquin, The Industrial Impact of Economic Uncertainty Shocks in Australia (December 20, 2019). CAMA Working Paper No. 89/2019, Available at SSRN: https://ssrn.com/abstract=3507151 or http://dx.doi.org/10.2139/ssrn.3507151

Hamish Burrell

Tasmanian School of Business and Economics, University of Tasmania ( email )

French Street
Sandy Bay
Tasmania, 7250
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

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