The Global Transmission of Real Economic Uncertainty

• DOI: 10.17016/ifdp.2021.1317
• Publication Date: 2021-04-30T19:57:13Z
• Authors: Juan M. Londono; Sai Ma; Beth Anne Wilson
• Keywords: Spillover effect; Component (thermodynamics)

<ns3:p>Using a sample of 30 countries representing about 65% the global GDP, we find that real economic uncertainty (REU) has negative long-lasting domestic effects and transmits across countries. The international spillover REU are (i) additional to those REUs, (ii) statistically significant, (iii) economically meaningful. Trade ties play key role in explaining why generated one country can affect outcomes other Based on this evidence, construct novel index for as trade-weighted average all countries' REUs. We disentangle foreign components that, average, innovations component contribute up 28% future variation industrial production, with effect being disproportionately larger its manufacturing component, contributing most tradable goods sector, than retail sales component.</ns3:p>