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Financial and non-financial global stock market volatility shocks

Author

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  • Wensheng Kang
  • Ronald A. Ratti
  • Joaquin Vespignani

Abstract

We decompose global stock market volatility shocks into financial originated shocks and non-financial originated shocks. Global stock market volatility shocks arising from financial sources reduce substantially more global outputs and inflation than non-financial sources shocks. Financial stock market volatility shocks forecasts 16.85% and 16.88% of the variation in global growth and inflation, respectively. In contrast, the non-financial stock market volatility shocks forecasts only 8.0% and 2.19% of the variation in global growth and inflation. Beside this markable difference global interest/policy rate responds similarly to both shocks.

Suggested Citation

  • Wensheng Kang & Ronald A. Ratti & Joaquin Vespignani, 2018. "Financial and non-financial global stock market volatility shocks," CAMA Working Papers 2018-58, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
  • Handle: RePEc:een:camaaa:2018-58
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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2018-11/58_2018_kang_ratti_vespignani.pdf
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    Keywords

    Global; Stock market volatility Shocks; Monetary Policy; FAVAR;

    JEL classification:

    • D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E66 - Macroeconomics and Monetary Economics - - Macroeconomic Policy, Macroeconomic Aspects of Public Finance, and General Outlook - - - General Outlook and Conditions
    • F62 - International Economics - - Economic Impacts of Globalization - - - Macroeconomic Impacts
    • G10 - Financial Economics - - General Financial Markets - - - General (includes Measurement and Data)

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