IDEAS home Printed from https://ideas.repec.org/p/pra/mprapa/103019.html
   My bibliography  Save this paper

Revising the Impact of Financial and Non-Financial Global Stock Market Volatility Shocks

Author

Listed:
  • Kang, Wensheng
  • Ratti, Ronald A.
  • Vespignani, Joaquin L.

Abstract

We decompose global stock market volatility shocks into financial originated shocks and nonfinancial originated shocks. Global stock market volatility shocks arising from financial sources reduce substantially more global outputs and inflation than non-financial sources shocks. Financial stock market volatility shocks forecasts 16.85% and 16.88% of the variation in global growth and inflation, respectively. In contrast, the on-financial stock market volatility shocks forecasts only 8.0% and 2.19% of the variation in global growth and inflation. Beside this markable difference global interest/policy rate responds similarly to both shocks.

Suggested Citation

  • Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin L., 2020. "Revising the Impact of Financial and Non-Financial Global Stock Market Volatility Shocks," MPRA Paper 103019, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:103019
    as

    Download full text from publisher

    File URL: https://mpra.ub.uni-muenchen.de/103019/1/MPRA_paper_103019.pdf
    File Function: original version
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Giovanni Caggiano & Efrem Castelnuovo & Juan Manuel Figueres, 2020. "Economic Policy Uncertainty Spillovers in Booms and Busts," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 82(1), pages 125-155, February.
    2. Bekaert, Geert & Hoerova, Marie & Lo Duca, Marco, 2013. "Risk, uncertainty and monetary policy," Journal of Monetary Economics, Elsevier, vol. 60(7), pages 771-788.
    3. Andrea Carriero & Todd E. Clark & Massimiliano Marcellino, 2018. "Measuring Uncertainty and Its Impact on the Economy," The Review of Economics and Statistics, MIT Press, vol. 100(5), pages 799-815, December.
    4. 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.
    5. Kyle Jurado & Sydney C. Ludvigson & Serena Ng, 2015. "Measuring Uncertainty," American Economic Review, American Economic Association, vol. 105(3), pages 1177-1216, March.
    6. Christiane Baumeister & Gert Peersman, 2013. "Time-Varying Effects of Oil Supply Shocks on the US Economy," American Economic Journal: Macroeconomics, American Economic Association, vol. 5(4), pages 1-28, October.
    7. Bonciani, Dario & Ricci, Martino, 2018. "The global effects of global risk and uncertainty," Working Paper Series 2179, European Central Bank.
    8. Ji, Qiang & Bouri, Elie & Roubaud, David, 2018. "Dynamic network of implied volatility transmission among US equities, strategic commodities, and BRICS equities," International Review of Financial Analysis, Elsevier, vol. 57(C), pages 1-12.
    9. Wensheng Kang & Ronald A. Ratti & Joaquin Vespignani, 2020. "Impact of global uncertainty on the global economy and large developed and developing economies," Applied Economics, Taylor & Francis Journals, vol. 52(22), pages 2392-2407, May.
    10. 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.
    11. Tino Berger & Sibylle Grabert & Bernd Kempa, 2016. "Global and Country-Specific Output Growth Uncertainty and Macroeconomic Performance," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 78(5), pages 694-716, October.
    12. Nicholas Bloom, 2009. "The Impact of Uncertainty Shocks," Econometrica, Econometric Society, vol. 77(3), pages 623-685, May.
    13. Bouri, Elie & Lucey, Brian & Roubaud, David, 2020. "Dynamics and determinants of spillovers across the option-implied volatilities of US equities," The Quarterly Review of Economics and Finance, Elsevier, vol. 75(C), pages 257-264.
    14. Dedola, Luca & Lippi, Francesco, 2005. "The monetary transmission mechanism: Evidence from the industries of five OECD countries," European Economic Review, Elsevier, vol. 49(6), pages 1543-1569, August.
    15. Ozturk, Ezgi O. & Sheng, Xuguang Simon, 2018. "Measuring global and country-specific uncertainty," Journal of International Money and Finance, Elsevier, vol. 88(C), pages 276-295.
    16. Vespignani, Joaquin L. & Ratti, Ronald A., 2016. "Not all international monetary shocks are alike for the Japanese economy," Economic Modelling, Elsevier, vol. 52(PB), pages 822-837.
    17. Haroon Mumtaz & Konstantinos Theodoridis, 2015. "The International Transmission Of Volatility Shocks: An Empirical Analysis," Journal of the European Economic Association, European Economic Association, vol. 13(3), pages 512-533, June.
    18. Redl, Chris, 2017. "The impact of uncertainty shocks in the United Kingdom," Bank of England working papers 695, Bank of England.
    19. Lutz Kilian, 2009. "Not All Oil Price Shocks Are Alike: Disentangling Demand and Supply Shocks in the Crude Oil Market," American Economic Review, American Economic Association, vol. 99(3), pages 1053-1069, June.
    20. Bouri, Elie & Gupta, Rangan & Hosseini, Seyedmehdi & Lau, Chi Keung Marco, 2018. "Does global fear predict fear in BRICS stock markets? Evidence from a Bayesian Graphical Structural VAR model," Emerging Markets Review, Elsevier, vol. 34(C), pages 124-142.
    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. Kang, Wensheng & Ratti, Ronald A. & Vespignani, Joaquin, 2021. "Financial and nonfinancial global stock market volatility shocks," Economic Modelling, Elsevier, vol. 96(C), pages 128-134.
    2. Giovanni Caggiano & Efrem Castelnuovo, 2023. "Global financial uncertainty," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 38(3), pages 432-449, April.
    3. Tosapol Apaitan & Pongsak Luangaram & Pym Manopimoke, 2022. "Uncertainty in an emerging market economy: evidence from Thailand," Empirical Economics, Springer, vol. 62(3), pages 933-989, March.
    4. Wensheng Kang & Ronald A. Ratti & Joaquin Vespignani, 2020. "Impact of global uncertainty on the global economy and large developed and developing economies," Applied Economics, Taylor & Francis Journals, vol. 52(22), pages 2392-2407, May.
    5. Rivolta, Giulia & Trecroci, Carmine, 2020. "Measuring the effects of U.S. uncertainty and monetary conditions on EMEs' macroeconomic dynamics," MPRA Paper 99403, University Library of Munich, Germany.
    6. Giovanni Caggiano & Efrem Castelnuovo, 2021. "Global Uncertainty," CESifo Working Paper Series 8885, CESifo.
    7. Redl, Chris, 2020. "Uncertainty matters: Evidence from close elections," Journal of International Economics, Elsevier, vol. 124(C).
    8. Beckmann, Joscha & Davidson, Sharada Nia & Koop, Gary & Schüssler, Rainer, 2023. "Cross-country uncertainty spillovers: Evidence from international survey data," Journal of International Money and Finance, Elsevier, vol. 130(C).
    9. repec:zbw:bofrdp:2021_001 is not listed on IDEAS
    10. Efrem Castelnuovo, 2022. "Uncertainty Before and During COVID-19: A Survey," "Marco Fanno" Working Papers 0279, Dipartimento di Scienze Economiche "Marco Fanno".
    11. Dibiasi, Andreas & Sarferaz, Samad, 2023. "Measuring macroeconomic uncertainty: A cross-country analysis," European Economic Review, Elsevier, vol. 153(C).
    12. Tosapol Apaitan & Pongsak Luangaram & Pym Manopimoke, 2020. "Uncertainty and Economic Activity: Does it Matter for Thailand?," PIER Discussion Papers 130, Puey Ungphakorn Institute for Economic Research.
    13. Liao, Wenting & Ma, Jun & Zhang, Chengsi, 2024. "Commodity returns co-movement, uncertainty shocks, and the US dollar exchange rate," Journal of International Money and Finance, Elsevier, vol. 143(C).
    14. Śmiech, Sławomir & Papież, Monika & Dąbrowski, Marek A., 2019. "How important are different aspects of uncertainty in driving industrial production in the CEE countries?," Research in International Business and Finance, Elsevier, vol. 50(C), pages 252-266.
    15. Jamie L. Cross & Chenghan Hou & Aubrey Poon, 2018. "International Transmission of Macroeconomic Uncertainty in Small Open Economies: An Empirical Approach," Working Papers No 12/2018, Centre for Applied Macro- and Petroleum economics (CAMP), BI Norwegian Business School.
    16. Nina Biljanovska & Francesco Grigoli & Martina Hengge, 2021. "Fear thy neighbor: Spillovers from economic policy uncertainty," Review of International Economics, Wiley Blackwell, vol. 29(2), pages 409-438, May.
    17. Oscar Claveria, 2021. "On the Aggregation of Survey-Based Economic Uncertainty Indicators Between Different Agents and Across Variables," Journal of Business Cycle Research, Springer;Centre for International Research on Economic Tendency Surveys (CIRET), vol. 17(1), pages 1-26, April.
    18. Andreas Dibiasi & Samad Sarferaz, 2023. "Measuring macroeconomic uncertainty: A cross-country analysis," Post-Print hal-04167343, HAL.
    19. Oscar Claveria, 2021. "Uncertainty indicators based on expectations of business and consumer surveys," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 48(2), pages 483-505, May.
    20. Miescu, Mirela S., 2023. "Uncertainty shocks in emerging economies: A global to local approach for identification," European Economic Review, Elsevier, vol. 154(C).

    More about this item

    Keywords

    Global; Stock market volatility Shocks; Monetary Policy; FAVAR;
    All these keywords.

    JEL classification:

    • E00 - Macroeconomics and Monetary Economics - - General - - - General
    • E02 - Macroeconomics and Monetary Economics - - General - - - Institutions and the Macroeconomy
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E40 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - General

    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:103019. 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.