IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/104117.html
   My bibliography  Save this paper

Industrial Impact of Economic Uncertainty Shocks in Australia: Revised

Author

Listed:
  • Burrel, Hamish
  • Vespignani, Joaquin L.

Abstract

Understanding the impact of economic uncertainty shocks at the industrial disaggregated level is critical for both fiscal and monetary policy response to economic uncertainty shocks. We estimate an SVAR model using quarterly Australian data from 1987:2 to 2018:4. The results of this paper emphasise that individual industries have unique responses to economic uncertainty shocks and do not necessarily reflect the response of the broader aggregate macroeconomy. We found the following stylized facts; i) The construction industry is the most negatively impacted industry by an economic uncertainty shock in terms of investment, output and employment in Australia; ii) The financial and insurance services industry also endures a substantial decline to these shocks, particularly on investment and employment indicators; iii) Economic uncertainty is shown to have less impact on the mining, health care and social assistance and public administration and safety industry, where the government plays a significant role.

Suggested Citation

  • Burrel, Hamish & Vespignani, Joaquin L., 2020. "Industrial Impact of Economic Uncertainty Shocks in Australia: Revised," MPRA Paper 104117, University Library of Munich, Germany.
  • Handle: RePEc:pra:mprapa:104117
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/104117/1/MPRA_paper_104117.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. N. Bloom, 2016. "Fluctuations in uncertainty," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 4.
    2. Angus Moore, 2017. "Measuring Economic Uncertainty and Its Effects," The Economic Record, The Economic Society of Australia, vol. 93(303), pages 550-575, December.
    3. Edda Claus & Mardi Dungey & Renée Fry, 2008. "Monetary Policy in Illiquid Markets: Options for a Small Open Economy," Open Economies Review, Springer, vol. 19(3), pages 305-336, July.
    4. Knop, Stephen J. & Vespignani, Joaquin L., 2014. "The sectorial impact of commodity price shocks in Australia," Economic Modelling, Elsevier, vol. 42(C), pages 257-271.
    5. Caggiano, Giovanni & Castelnuovo, Efrem & Groshenny, Nicolas, 2014. "Uncertainty shocks and unemployment dynamics in U.S. recessions," Journal of Monetary Economics, Elsevier, vol. 67(C), pages 78-92.
    6. Efrem Castelnuovo & Guay Lim & Giovanni Pellegrino, 2017. "A Short Review of the Recent Literature on Uncertainty," Australian Economic Review, The University of Melbourne, Melbourne Institute of Applied Economic and Social Research, vol. 50(1), pages 68-78, March.
    7. Scott R. Baker & Nicholas Bloom & Steven J. Davis, 2016. "Measuring Economic Policy Uncertainty," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 131(4), pages 1593-1636.
    8. Ben S. Bernanke, 1983. "Irreversibility, Uncertainty, and Cyclical Investment," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 98(1), pages 85-106.
    9. Jarkko P. Jääskelä & Penelope Smith, 2013. "Terms of Trade Shocks: What Are They and What Do They Do?," The Economic Record, The Economic Society of Australia, vol. 89(285), pages 145-159, June.
    10. David Jacobs & Vanessa Rayner, 2012. "The Role of Credit Supply in the Australian Economy," RBA Research Discussion Papers rdp2012-02, Reserve Bank of Australia.
    11. Grossman, Valerie & Mack, Adrienne & Martínez-García, Enrique, 2014. "A New Database of Global Economic Indicators," Journal of Economic and Social Measurement, IOS Press, issue 3, pages 163-197.
    12. Joaquin L. Vespignani, 2013. "The Industrial Impact of Monetary Shocks During the Inflation‐Targeting Era in Australia," Australian Economic History Review, Economic History Society of Australia and New Zealand, vol. 53(1), pages 47-71, March.
    13. Rodrigo Cerda & Álvaro Silva & José Tomás Valente, 2018. "Impact of economic uncertainty in a small open economy: the case of Chile," Applied Economics, Taylor & Francis Journals, vol. 50(26), pages 2894-2908, June.
    14. Jääskelä, Jarkko P. & Jennings, David, 2011. "Monetary policy and the exchange rate: Evaluation of VAR models," Journal of International Money and Finance, Elsevier, vol. 30(7), pages 1358-1374.
    15. Kang, Wensheng & Lee, Kiseok & Ratti, Ronald A., 2014. "Economic policy uncertainty and firm-level investment," Journal of Macroeconomics, Elsevier, vol. 39(PA), pages 42-53.
    16. Gieseck Arne & Largent Yannis, 2016. "The Impact of Macroeconomic Uncertainty on Activity in the Euro Area," Review of Economics, De Gruyter, vol. 67(1), pages 25-52, May.
    17. Philip Liu, 2010. "The Effects of International Shocks on Australia's Business Cycle," The Economic Record, The Economic Society of Australia, vol. 86(275), pages 486-503, December.
    18. Vespignani, Joaquin L., 2015. "On the differential impact of monetary policy across states/territories and its determinants in Australia: Evidence and new methodology from a small open economy," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 34(C), pages 1-13.
    19. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, May.
    20. Vernon Topp & Leo Soames & Dean Parham & Harry Bloch, 2008. "Productivity in the Mining Industry: Measurement and Interpretation," Staff Working Papers 0807, Productivity Commission, Government of Australia.
    21. Mardi Dungey & Renee Fry-McKibbin & Verity Linehan, 2014. "Chinese resource demand and the natural resource supplier," Applied Economics, Taylor & Francis Journals, vol. 46(2), pages 167-178, January.
    22. Leon Berkelmans, 2005. "Credit and Monetary Policy: An Australian SVAR," RBA Research Discussion Papers rdp2005-06, Reserve Bank of Australia.
    23. Jeremy Lawson & Daniel Rees, 2008. "A Sectoral Model of the Australian Economy," RBA Research Discussion Papers rdp2008-01, Reserve Bank of Australia.
    24. Elaine Chung & Marion Kohler & Christine Lewis, 2011. "The Exchange Rate and Consumer Prices," RBA Bulletin (Print copy discontinued), Reserve Bank of Australia, pages 9-16, September.
    25. Thang Long Tran, 2014. "Uncertainty and Investment: Evidence from Australian Firm Panel Data," The Economic Record, The Economic Society of Australia, vol. 90, pages 87-101, June.
    26. Huseyin Gulen & Mihai Ion, 2016. "Editor's Choice Policy Uncertainty and Corporate Investment," The Review of Financial Studies, Society for Financial Studies, vol. 29(3), pages 523-564.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Hamish Burrell & Joaquin Vespignani, 2021. "The Industrial Impact of Economic Uncertainty Shocks in Australia," Economic Papers, The Economic Society of Australia, vol. 40(3), pages 248-271, September.
    2. Knop, Stephen J & Vespignani, Joaquin L., 2014. "Industrial Impact of Commodity Price Shocks in Australia," MPRA Paper 104678, University Library of Munich, Germany.
    3. Angus Moore, 2017. "Measuring Economic Uncertainty and Its Effects," The Economic Record, The Economic Society of Australia, vol. 93(303), pages 550-575, December.
    4. Knop, Stephen J. & Vespignani, Joaquin L., 2014. "The sectorial impact of commodity price shocks in Australia," Economic Modelling, Elsevier, vol. 42(C), pages 257-271.
    5. Choi, Sangyup & Furceri, Davide & Huang, Yi & Loungani, Prakash, 2018. "Aggregate uncertainty and sectoral productivity growth: The role of credit constraints," Journal of International Money and Finance, Elsevier, vol. 88(C), pages 314-330.
    6. Tajaddini, Reza & Gholipour, Hassan F., 2021. "Economic uncertainty and business formation: A cross-country analysis," Journal of Business Venturing Insights, Elsevier, vol. 16(C).
    7. Long, Shaobo & Pei, Hongxia & Tian, Hao & Li, Fangfang, 2021. "Asymmetric impacts of economic policy uncertainty, capital cost, and raw material cost on China’s investment," Economic Analysis and Policy, Elsevier, vol. 72(C), pages 129-144.
    8. Dibiasi, Andreas & Abberger, Klaus & Siegenthaler, Michael & Sturm, Jan-Egbert, 2018. "The effects of policy uncertainty on investment: Evidence from the unexpected acceptance of a far-reaching referendum in Switzerland," European Economic Review, Elsevier, vol. 104(C), pages 38-67.
    9. Smales, Lee A., 2020. "Examining the relationship between policy uncertainty and market uncertainty across the G7," International Review of Financial Analysis, Elsevier, vol. 71(C).
    10. Mardi Dungey & Renee Fry‐Mckibbin & Vladimir Volkov, 2020. "Transmission of a Resource Boom: The Case of Australia," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(3), pages 503-525, June.
    11. Saygin Sahinoz & Evren Erdogan Cosar, 2020. "Quantifying uncertainty and identifying its impacts on the Turkish economy," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 47(2), pages 365-387, May.
    12. Chen, Xikai & Le, Cao Hoang Anh & Shan, Yaowen & Taylor, Stephen, 2020. "Australian policy uncertainty and corporate investment," Pacific-Basin Finance Journal, Elsevier, vol. 61(C).
    13. Claeys, Peter & Vašíček, Bořek, 2019. "Transmission of uncertainty shocks: Learning from heterogeneous responses on a panel of EU countries," International Review of Economics & Finance, Elsevier, vol. 64(C), pages 62-83.
    14. Corinna Ghirelli & María Gil & Javier J. Pérez & Alberto Urtasun, 2021. "Measuring economic and economic policy uncertainty and their macroeconomic effects: the case of Spain," Empirical Economics, Springer, vol. 60(2), pages 869-892, February.
    15. Manalo, Josef & Perera, Dilhan & Rees, Daniel M., 2015. "Exchange rate movements and the Australian economy," Economic Modelling, Elsevier, vol. 47(C), pages 53-62.
    16. Al-Thaqeb, Saud Asaad & Algharabali, Barrak Ghanim, 2019. "Economic policy uncertainty: A literature review," The Journal of Economic Asymmetries, Elsevier, vol. 20(C).
    17. Simran, & Sharma, Anil Kumar, 2024. "Asymmetric nexus between economic policy uncertainty and the Indian stock market: Evidence using NARDL approach," The Quarterly Review of Economics and Finance, Elsevier, vol. 93(C), pages 91-101.
    18. Quelhas, João, 2022. "Monetary Policy Uncertainty and its impact on the real economy: Empirical Evidence from the Euro area," MPRA Paper 113621, University Library of Munich, Germany, revised May 2022.
    19. Trung, Nguyen Ba, 2019. "The spillover effects of US economic policy uncertainty on the global economy: A global VAR approach," The North American Journal of Economics and Finance, Elsevier, vol. 48(C), pages 90-110.
    20. Saud Asaad Al‐Thaqeb & Barrak Ghanim Algharabali & Khaled Tareq Alabdulghafour, 2022. "The pandemic and economic policy uncertainty," International Journal of Finance & Economics, John Wiley & Sons, Ltd., vol. 27(3), pages 2784-2794, July.

    More about this item

    Keywords

    Economic Uncertainty; Economic Uncertainty Shocks; SVAR; Australian economy; Australian Industries;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:pra:mprapa:104117. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Joachim Winter (email available below). General contact details of provider: https://edirc.repec.org/data/vfmunde.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.