Global Uncertainty

60 Pages Posted: 19 Feb 2021

See all articles by Giovanni Caggiano

Giovanni Caggiano

Department of Economics, Monash University; University of Padua

Efrem Castelnuovo

University of Padua - Department of Economics

Multiple version iconThere are 3 versions of this paper

Date Written: 2021


We estimate a novel measure of global financial uncertainty (GFU) with a dynamic factor framework that jointly models global, regional, and country-specific factors. We quantify the impact of GFU shocks on global output with a VAR analysis that achieves set-identification via a combination of narrative, sign, ratio, and correlation restrictions. We find that the world output loss that materialized during the great recession would have been 13% lower in absence of GFU shocks. We also unveil the existence of a global finance uncertainty multiplier: the more global financial conditions deteriorate after GFU shocks, the larger the world output contraction is.

JEL Classification: C320, E320

Suggested Citation

Caggiano, Giovanni and Castelnuovo, Efrem, Global Uncertainty (2021). CESifo Working Paper No. 8885, Available at SSRN: or

Giovanni Caggiano (Contact Author)

Department of Economics, Monash University ( email )

900 Dandenong Road
Caulfield East, Victoria 3145

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University of Padua ( email )

Via 8 Febbraio, 2
Padova, Vicenza 35122

Efrem Castelnuovo

University of Padua - Department of Economics ( email )

via Del Santo 33
Padova, 35123

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