TY - JOUR
T1 - Cross-country uncertainty spillovers
T2 - evidence from international survey data
AU - Beckmann, Joscha
AU - Davidson, Sharada Nia
AU - Koop, Gary
AU - Schussler, Rainer
PY - 2023/2/28
Y1 - 2023/2/28
N2 - Using a large international survey of professional forecasters, we construct measures of economic uncertainty surrounding output growth, inflation, the interest rate, exchange rate and current account. We then analyze uncertainty spillovers across major advanced and emerging economies using large multi-country Bayesian Panel VARs. We consider how our results change if our uncertainty measures reflect: disagreement among forecasters (idiosyncratic uncertainty); the variance of their mean forecast errors (common uncertainty); or both types of uncertainty. We show that the US is an important but not dominant source of uncertainty, affecting other economies through interest rate and exchange rate uncertainty. This reflects the major role played by US monetary policy and the dollar in the global financial system. Crucially, though, the Eurozone followed by the UK and China are also important sources of uncertainty. We also find that, on average, foreign interest rate and exchange rate uncertainty are more important than foreign output growth uncertainty. While spillovers in idiosyncratic uncertainty are more frequently observed, failing to account for common uncertainty can lead us to overestimate the role played by smaller economies.
AB - Using a large international survey of professional forecasters, we construct measures of economic uncertainty surrounding output growth, inflation, the interest rate, exchange rate and current account. We then analyze uncertainty spillovers across major advanced and emerging economies using large multi-country Bayesian Panel VARs. We consider how our results change if our uncertainty measures reflect: disagreement among forecasters (idiosyncratic uncertainty); the variance of their mean forecast errors (common uncertainty); or both types of uncertainty. We show that the US is an important but not dominant source of uncertainty, affecting other economies through interest rate and exchange rate uncertainty. This reflects the major role played by US monetary policy and the dollar in the global financial system. Crucially, though, the Eurozone followed by the UK and China are also important sources of uncertainty. We also find that, on average, foreign interest rate and exchange rate uncertainty are more important than foreign output growth uncertainty. While spillovers in idiosyncratic uncertainty are more frequently observed, failing to account for common uncertainty can lead us to overestimate the role played by smaller economies.
KW - uncertainty shocks
KW - spillovers
KW - Bayesian panel VAR
KW - stochastic search variable selection
KW - consensus forecasts
U2 - 10.1016/j.jimonfin.2022.102760
DO - 10.1016/j.jimonfin.2022.102760
M3 - Article
SN - 0261-5606
VL - 130
JO - Journal of International Money and Finance
JF - Journal of International Money and Finance
M1 - 102760
ER -