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Economic policy uncertainty in the US: Does it matter for the Euro area?

  • Colombo, Valentina

We investigate the effects of a US economic policy uncertainty shock on some Euro area macroeconomic aggregates via Structural VARs. We model the indicators of economic policy uncertainty recently developed by Baker et al. (2013) jointly with the aggregate price indexes and alternative indicators of the business cycle for the two above indicated economic areas. According to our SVARs, a one standard deviation shock to US economic policy uncertainty leads to a statistically significant fall in the European industrial production and prices of −0.12% and −0.06%, respectively. The contribution of the US uncertainty shock on the European aggregates is shown to be quantitatively larger than the one exerted by an Euro area-specific uncertainty shock.

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File URL: http://www.sciencedirect.com/science/article/pii/S0165176513003066
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Article provided by Elsevier in its journal Economics Letters.

Volume (Year): 121 (2013)
Issue (Month): 1 ()
Pages: 39-42

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Handle: RePEc:eee:ecolet:v:121:y:2013:i:1:p:39-42
Contact details of provider: Web page: http://www.elsevier.com/locate/ecolet

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  1. Carlo Favero & Francesco Giavazzi, 2008. "Should the Euro Area Be Run as a Closed Economy?," American Economic Review, American Economic Association, vol. 98(2), pages 138-45, May.
  2. Nicholas Bloom, 2007. "The Impact of Uncertainty Shocks," NBER Working Papers 13385, National Bureau of Economic Research, Inc.
  3. Michael Ehrmann & Marcel Fratzscher, 2009. "Global Financial Transmission of Monetary Policy Shocks," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 71(6), pages 739-759, December.
  4. Gabriela Nodari, 2013. "Financial Regulation Policy Uncertainty and Credit Spreads in the U.S," "Marco Fanno" Working Papers 0170, Dipartimento di Scienze Economiche "Marco Fanno".
  5. Michelle Alexopoulos & Jon Cohen, 2009. "Uncertain Times, uncertain measures," Working Papers tecipa-352, University of Toronto, Department of Economics.
  6. Lutz Kilian, 1998. "Small-Sample Confidence Intervals For Impulse Response Functions," The Review of Economics and Statistics, MIT Press, vol. 80(2), pages 218-230, May.
  7. Sims, Christopher A & Stock, James H & Watson, Mark W, 1990. "Inference in Linear Time Series Models with Some Unit Roots," Econometrica, Econometric Society, vol. 58(1), pages 113-44, January.
  8. Kim, Soyoung, 2001. "International transmission of U.S. monetary policy shocks: Evidence from VAR's," Journal of Monetary Economics, Elsevier, vol. 48(2), pages 339-372, October.
  9. Mumtaz, Haroon & Theodoridis, Konstantinos, 2012. "The international transmission of volatility shocks: an empirical analysis," Bank of England working papers 463, Bank of England.
  10. Giovanni Caggiano & Efrem Castelnuovo & Nicolas Groshenny, 2013. "Uncertainty Shocks and Unemployment Dynamics: An Analysis of Post-WWII U.S. Recessions," "Marco Fanno" Working Papers 0166, Dipartimento di Scienze Economiche "Marco Fanno".
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