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Policy Uncertainty Shocks and Small Open Economies in Monetary Union: a Case Study of Ireland

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  • Jonathan Rice

    (Department of Economics, Trinity College Dublin)

Abstract

This paper explores the implications of policy uncertainty shocks for Ireland, a small open economy operating within monetary union. Exogenous domestic uncertainty shocks foreshadow persistent declines in Irish investment and employment, with no clear response by the ECB. On the other hand, no such decline in demand is observed following global uncertainty shocks, largely resulting from an accommodative monetary policy stance by the ECB. Results from this paper suggest that policy uncertainty shocks have negative and persistent effects on Irish real activity, only when monetary policy does not counteract these shocks. Common identification problems in the literature are also discussed and suggestions are made for future work in the area.

Suggested Citation

  • Jonathan Rice, 2020. "Policy Uncertainty Shocks and Small Open Economies in Monetary Union: a Case Study of Ireland," Trinity Economics Papers tep1020, Trinity College Dublin, Department of Economics.
    • Handle: RePEc:tcd:tcduee:tep1020
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    2. Lucey, Brian M. & Vigne, Samuel A. & Yarovaya, Larisa & Wang, Yizhi, 2022. "The cryptocurrency uncertainty index," Finance Research Letters, Elsevier, vol. 45(C).

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    More about this item

    Keywords

    Small Open Economy; Uncertainty; Investment; Consumption; Interest Rates; Monetary Policy.;
    All these keywords.

    JEL classification:

    • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • E4 - Macroeconomics and Monetary Economics - - Money and Interest Rates

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