Cross-country uncertainty spillovers: evidence from international survey data

Joscha Beckmann, Sharada Nia Davidson, Gary Koop, Rainer Schussler

Research output: Contribution to journalArticlepeer-review

1 Citation (Scopus)

Abstract

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.
Original languageEnglish
Article number102760
Number of pages17
JournalJournal of International Money and Finance
Volume130
Early online date1 Nov 2022
DOIs
Publication statusPublished - 28 Feb 2023

Keywords

  • uncertainty shocks
  • spillovers
  • Bayesian panel VAR
  • stochastic search variable selection
  • consensus forecasts

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