Global financial uncertainty

Giovanni Caggiano, Efrem Castelnuovo

Research output: Contribution to journalArticleResearchpeer-review

4 Citations (Scopus)


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 contraction in world output during the Great Recession would have been 13% milder in absence of GFU shocks. We also find support for a global finance uncertainty multiplier: the more global financial conditions deteriorate after a GFU shock, the larger the world output contraction is.

Original languageEnglish
Pages (from-to)432-449
Number of pages18
JournalJournal of Applied Econometrics
Issue number3
Publication statusPublished - Apr 2023


  • dynamic hierarchical factor model
  • global finance uncertainty multiplier
  • global financial uncertainty
  • structural VAR
  • world output loss

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