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Spillovers of the US real and financial uncertainty on the Euro area

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  • Yassine Bakkar
  • Rachatar Nilavongse
  • Anup Kumar Saha

Abstract

We study the spillovers of US real uncertainty and financial uncertainty shocks on Euro area economic activity in an SVAR framework. We find that a rise in US real or financial uncertainty triggers a decline in industrial production and an increase in credit spreads in the Euro area. The adverse effects of financial uncertainty shocks on Euro area industrial production are larger than those stemming from real uncertainty shocks (−0.8% versus −0.4%) due to a larger extent of financial friction. The contribution of US financial uncertainty shocks, vis-à-vis US real uncertainty shocks, to the Euro area is quantitatively more important.

Suggested Citation

  • Yassine Bakkar & Rachatar Nilavongse & Anup Kumar Saha, 2021. "Spillovers of the US real and financial uncertainty on the Euro area," Applied Economics Letters, Taylor & Francis Journals, vol. 28(15), pages 1249-1258, September.
    • Handle: RePEc:taf:apeclt:v:28:y:2021:i:15:p:1249-1258
    DOI: 10.1080/13504851.2020.1808166
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    Cited by:

    1. Rachatar Nilavongse & Michał Rubaszek & Karsten Staehr & Gazi Salah Uddin, 2021. "Foreign and Domestic Uncertainty Shocks in Four Open Economies," Open Economies Review, Springer, vol. 32(5), pages 933-954, November.
    2. Wang, Xinya & Xu, Xin & Rong, Xueyun & Xuan, Siyuan, 2024. "Identification of the contagion effect in China's financial market uncertainties: A multiscale and dynamic perspective," International Review of Economics & Finance, Elsevier, vol. 93(PA), pages 1340-1362.

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