GAUK No. 822319: Uncertainty and the Macroeconomy: Disentangling Global and Local Shocks
|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. Our attempt is to distinguish between the uncertainty shocks originating from the global and local levels and estimate their impact on economies. By this, we will be also allowed to estimating the spillover of the global uncertainty shock to the local uncertainty and vice versa. Obtained results might provide the important policy lesson whether the local (state) and regional authorities (European Union) are able to eliminate the adverse effect of the global and local uncertainty shocks. 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. Particularly, the link between financial cycles and the uncertainty will be analysed.
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:|