Tracking Global Economic Uncertainty: Implications for the Euro Area

43 Pages Posted: 26 Apr 2021 Last revised: 18 Nov 2021

See all articles by Alina Bobasu

Alina Bobasu

European Central Bank (ECB)

André Geis

European Central Bank (ECB)

Lucia Quaglietti

World Bank

Martino Ricci

European Central Bank (ECB)

Date Written: April, 2021

Abstract

This paper sheds light on the impact of global macroeconomic uncertainty on the euro area economy. We build on the methodology proposed by Jurado et al. (2015) and estimate global as well as country-specific measures of economic uncertainty for fifteen key euro area trade partners and the euro area. Our measures display a clear counter-cyclical pattern and line up well to a wide range of historical events generally associated with heightened uncertainty. In addition, following Piffer and Podstawski (2018), we estimate a Proxy SVAR where we instrument uncertainty shocks with changes in the price of gold around specific past events. We find that, historically, global uncertainty shocks have been important drivers of fluctuations in euro area economic activity, with one standard deviation increase in the identified uncertainty shock subtracting around 0.15 percentage points from euro area industrial production on impact.

JEL Classification: D81, C11, C55, E32, F41, F62

Suggested Citation

Bobasu, Alina and Geis, André and Quaglietti, Lucia and Ricci, Martino, Tracking Global Economic Uncertainty: Implications for the Euro Area (April, 2021). ECB Working Paper No. 20212541, Available at SSRN: https://ssrn.com/abstract=3834416 or http://dx.doi.org/10.2139/ssrn.3834416

Alina Bobasu (Contact Author)

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

André Geis

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

Lucia Quaglietti

World Bank ( email )

1818 H Street, NW
Washington, DC 20433
United States

Martino Ricci

European Central Bank (ECB) ( email )

Sonnemannstrasse 22
Frankfurt am Main, 60314
Germany

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