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Uncertainty shocks in emerging economies

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  • Mirela Miescu

Abstract

The paper investigates the effects of uncertainty shocks in emerging economies (EMEs). We construct a global uncertainty indicator as well as country uncertainty measures for fifteen relatively small emerging economies. We adopt an instrumental variable approach to identify exogenous uncertainty shocks in the EMEs. To deal with the data limitations specific to emerging countries, we develop a new Bayesian algorithm to estimate a proxy panel structural vector autoregressive (SVAR) model. We find that uncertainty shocks in EMEs cause severe falls in GDP and stock price indexes, generate inflation, depreciate the currency and are not followed by a subsequent overshoot in activity. Estimation implies considerable heterogeneity across economies in the response to uncertainty shocks which can be (in part) explained by country characteristics.

Suggested Citation

  • Mirela Miescu, 2019. "Uncertainty shocks in emerging economies," Working Papers 277077821, Lancaster University Management School, Economics Department.
  • Handle: RePEc:lan:wpaper:277077821
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    References listed on IDEAS

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    More about this item

    Keywords

    Uncertainty shocks; proxy SVAR; Emerging economies; Panel data;
    All these keywords.

    JEL classification:

    • C3 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables
    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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