Grant detail

GAUK No. 1398418: Uncertainty and the Macroeconomy: Disentangling Global and Local Shocks (submitted in November 2017)

Principal investigator: Mgr. Ing. Tomáš Šestořád
Description: The objective of our project is to investigate the effects and propagation mechanisms of the uncertainty shocks in the five biggest economies of the EU: Germany, France, Italy, Spain and the United Kingdom. The importance of uncertainty shocks has been acknowledged in the literature in the recent years, however most of the applications are for the United States. We focus on relatively diverse and much smaller economies. Importantly, our attempt is to distinguish between the uncertainty shocks originating from the global and local levels. By this, we will be allowed to estimating the spillover of the global uncertainty shock to the local uncertainty and vice versa. Last but not least, we will build on the existing literature as we will attempt to determine channels that are the most important for the propagation of the global and local uncertainty shocks.
To achieve our objectives, we will estimate the local uncertainty indices for individual countries since widely used national indices are significantly correlated with the global uncertainty. To identify how the global and local uncertainty shocks are propagated to the domestic economy, we will use the framework of vector autoregressions, augmented for potential nonlinearities. The models will be estimated using state-of-art Bayesian techniques.
Work in grant:
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End date: 2019




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