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Economic policy uncertainty in the US: Does it matter for the Euro area?

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  • Colombo, Valentina

Abstract

We investigate the effects of a US economic policy uncertainty shock on some Euro area macroeconomic aggregates via Structural VARs. We model the indicators of economic policy uncertainty recently developed by Baker et al. (2013) jointly with the aggregate price indexes and alternative indicators of the business cycle for the two above indicated economic areas. According to our SVARs, a one standard deviation shock to US economic policy uncertainty leads to a statistically significant fall in the European industrial production and prices of −0.12% and −0.06%, respectively. The contribution of the US uncertainty shock on the European aggregates is shown to be quantitatively larger than the one exerted by an Euro area-specific uncertainty shock.

Suggested Citation

  • Colombo, Valentina, 2013. "Economic policy uncertainty in the US: Does it matter for the Euro area?," Economics Letters, Elsevier, vol. 121(1), pages 39-42.
    • Handle: RePEc:eee:ecolet:v:121:y:2013:i:1:p:39-42
    DOI: 10.1016/j.econlet.2013.06.024
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    More about this item

    Keywords

    Economic policy uncertainty; US–Euro area spillovers; Structural vector autoregressions;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • F42 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - International Policy Coordination and Transmission

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