Projects per year
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.
- dynamic hierarchical factor model
- global finance uncertainty multiplier
- global financial uncertainty
- structural VAR
- world output loss
Caggiano, G., Castelnuovo, E. & Modugno, M.
28/06/19 → 21/04/22