Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/232482 
Year of Publication: 
2021
Series/Report no.: 
CESifo Working Paper No. 8885
Publisher: 
Center for Economic Studies and Ifo Institute (CESifo), Munich
Abstract: 
We estimate a novel measure of global financial uncertainty (GFU) with a dynamic factor framework that jointly models global, regional, and country-specific factors. We quantify the impact of GFU shocks on global output with a VAR analysis that achieves set-identification via a combination of narrative, sign, ratio, and correlation restrictions. We find that the world output loss that materialized during the great recession would have been 13% lower in absence of GFU shocks. We also unveil the existence of a global finance uncertainty multiplier: the more global financial conditions deteriorate after GFU shocks, the larger the world output contraction is.
Subjects: 
Global Financial Uncertainty
dynamic hierarchical factor model
structural VAR
world output loss
global finance uncertainty multiplier
JEL: 
C32
E32
Document Type: 
Working Paper
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