Spillovers of macroeconomic uncertainty among major economies

Abstract

Using the forecast error variance decomposition from a vector auto-regression, this article examines both average and time-varying spillovers of macroeconomic uncertainty across major economies since 1997 and compares the ongoing crisis with earlier episodes. We show that spillover effects of macroeconomic uncertainty across major economies display no trend but clear bursts and reach its respective peaks during the 2008 global financial crisis, which attests to the severity of the current episode.

Keywords:

• macroeconomic uncertainty
• spillovers
• financial crisis
• contagion
• variance decomposition

JEL Classification:

• E32
• F42
• F36

Funding

This research is financially supported by the National Natural Science Foundation of China [project number 71371022] and [project number 71173008].