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The evolving impact of global, region-specific and country-specific uncertainty

Author

Listed:
  • Haroon Mumtaz

    (Queen Mary University of London)

  • Alberto Musso

    (European Central Bank)

Abstract

We develop a dynamic factor model with time-varying parameters and stochastic volatility, estimate it with several variables for a large number of countries and decompose the variance of each variable in terms of contributions from uncertainty common to all countries (global uncertainty), region-specific uncertainty and country-specific uncertainty. Among other findings, the estimates suggest that global uncertainty plays a primary role in explaining the volatility of inflation, interest rates and stock prices, although to a varying extent over time, while all uncertainty components are found to play a non-negligible role for real economic activity, credit and money for most countries.

Suggested Citation

  • Haroon Mumtaz & Alberto Musso, 2018. "The evolving impact of global, region-specific and country-specific uncertainty," Working Papers 866, Queen Mary University of London, School of Economics and Finance.
    • Handle: RePEc:qmw:qmwecw:866
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    References listed on IDEAS

    as
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    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Dynamic Factor Model; Time-Varying Parameters; Stochastic Volatility; Uncertainty Shocks; Global Uncertainty;
    All these keywords.

    JEL classification:

    • C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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