Working Paper: CEPR ID: DP13970
Authors: Massimiliano Marcellino; Todd Clark; Andrea Carriero
Abstract: This paper uses a large vector autoregression to measure international macroeconomic uncertainty and its effects on major economies. We provide evidence of signi cant commonality in macroeconomic volatility, with one common factor driving strong comovement across economies and variables. We measure uncertainty and its effects with a large model in which the error volatilities feature a factor structure containing time-varying global components and idiosyncratic components. Global uncertainty contemporaneously affects both the levels and volatilities of the included variables. Our new estimates of international macroeconomic uncertainty indicate that surprise increases in uncertainty reduce output and stock prices, adversely affect labor market conditions, and in some economies lead to an easing of monetary policy.
Keywords: business cycle; uncertainty; stochastic volatility; large datasets
JEL Codes: F44; E32; C55; C11
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| International macroeconomic uncertainty (F49) | GDP (E20) |
| International macroeconomic uncertainty (F49) | Labor market conditions (J29) |
| International macroeconomic uncertainty (F49) | Stock prices (G19) |
| International macroeconomic uncertainty (F49) | Monetary policy (E52) |
| International macroeconomic uncertainty (F49) | GDP growth (O49) |
| International macroeconomic uncertainty (F49) | Economic performance (P17) |
| Shocks to uncertainty (D89) | GDP fluctuations (F44) |
| International macroeconomic uncertainty (F49) | Economic indicators (E30) |