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Volatility spillovers and the global financial cycle across economies: evidence from a global semi-structural model

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  • Javier G. Gómez-Pineda

    (Banco de la República de Colombia)

Abstract

The paper provides some evidence on the relevance of global uncertainty and risk aversion and the lesser importance of US interest rates for the global financial and business cycles. As framework, we use a global semi-structural model augmented with financial and trade interlinkages. Financial interlinkages are modelled with proposed global uncertainty, global risk aversion and global financial cycle channels. Trade interlinkages are modelled with proposed value-chain trade equations. We find that global uncertainty and global risk aversion are, by far, the main volatility factors in all economies. Other volatility factors such as US interest rates, foreign interest rates and trade-related factors rarely explain shares of forecast error variance above one percent.

Suggested Citation

  • Javier G. Gómez-Pineda, 2017. "Volatility spillovers and the global financial cycle across economies: evidence from a global semi-structural model," Borradores de Economia 1011, Banco de la Republica de Colombia.
  • Handle: RePEc:bdr:borrec:1011
    DOI: 10.32468/be.1011
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    More about this item

    Keywords

    Global financial cycle; Uncertainty; Risk aversion; Global risk; Global value chains; Value-chain trade equations; Global semi-structural model;
    All these keywords.

    JEL classification:

    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies
    • E37 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Forecasting and Simulation: Models and Applications
    • E43 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Interest Rates: Determination, Term Structure, and Effects
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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