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Uncertainty shocks and financial crisis indicators

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  • Hristov, Nikolay
  • Roth, Markus

Abstract

The current paper broadens the understanding for the role of uncertainty in the context of a macroeconomic environment. It focuses on the implications of uncertainty shocks on indicators that tend to precede financial crises. In an empirical analysis we show for a set of four euro area countries that negative uncertainty shocks, while accompanied by favorable effects to economic activity, are followed by unfavorable reactions of financial crisis indicators. We conclude that uncertainty indicators contain some useful information on the potential buildup of vulnerabilities in the financial system.

Suggested Citation

  • Hristov, Nikolay & Roth, Markus, 2019. "Uncertainty shocks and financial crisis indicators," Discussion Papers 36/2019, Deutsche Bundesbank.
  • Handle: RePEc:zbw:bubdps:362019
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    References listed on IDEAS

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    Cited by:

    1. Chen, Hongyi & Tillmann, Peter, 2021. "Monetary policy uncertainty in China," Journal of International Money and Finance, Elsevier, vol. 110(C).
    2. PINSHI, Christian P., 2023. "Claims, Deposits and Financial Conditions in DR Congo: Impact of COVID-19 on the Financial System," MPRA Paper 117381, University Library of Munich, Germany.
    3. Costantini, Mauro & Sousa, Ricardo M., 2022. "What uncertainty does to euro area sovereign bond markets: Flight to safety and flight to quality," Journal of International Money and Finance, Elsevier, vol. 122(C).
    4. Oliver Hülsewig & Horst Rottmann, 2022. "Euro Area Periphery Countries' Fiscal Policy and Monetary Policy Surprises," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(3), pages 544-568, June.
    5. Schüler, Yves S., 2020. "The impact of uncertainty and certainty shocks," Discussion Papers 14/2020, Deutsche Bundesbank.
    6. MALATA, Alain K. & PINSHI, Christian P., 2020. "Système financier et COVID-19 : Un examen de l’impact en RDC [Financial system and COVID-19: A review of the impact in the DRC]," MPRA Paper 107772, University Library of Munich, Germany.

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    More about this item

    Keywords

    uncertainty; crisis indicators; structural macroeconomic shocks; signrestrictions;
    All these keywords.

    JEL classification:

    • D89 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Other
    • 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
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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