Uncertainty shocks in emerging economies : a global to local approach for identification

Miescu, Mirela (2023) Uncertainty shocks in emerging economies : a global to local approach for identification. European Economic Review, 154: 104437. ISSN 0014-2921

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Abstract

The paper investigates the effects of uncertainty shocks in emerging economies (EMEs). I construct novel measures of uncertainty for fifteen small EMEs and to address endogeneity I instrument them with fluctuations in global uncertainty. My results show that uncertainty shocks have substantial contractionary effects on GDP, stock prices and local currencies and the recessionary effect is much stronger in EMEs compared to advanced economies (AEs). I also estimate a negative co-movement between prices and output which triggers a delayed monetary tightening in correspondence to the inflationary peak. Counterfactual scenarios reveal that in the absence of uncertainty shocks, the fall in GDP recorded in EMEs during the 2008–2009 crisis would have been attenuated by around 2%.

Item Type:
Journal Article
Journal or Publication Title:
European Economic Review
Uncontrolled Keywords:
Research Output Funding/no_not_funded
Subjects:
?? uncertainty shockspanel varinstrumental variablesemerging economiesno - not fundednofinanceeconomics and econometrics ??
ID Code:
199658
Deposited By:
Deposited On:
25 Jul 2023 14:55
Refereed?:
Yes
Published?:
Published
Last Modified:
16 Jul 2024 00:00