Spillovers of the US real and financial uncertainty on the Euro area

Bakkar, Yassine; Nilavongse, Rachatar; Saha, Anup Kumar

Abstract

We study the spillovers of US real uncertainty and financial uncertainty shocks on Euro area economic activity in an SVAR framework. We find that a rise in US real or financial uncertainty triggers a decline in industrial production and an increase in credit spreads in the Euro area. The adverse effects of financial uncertainty shocks on Euro area industrial production are larger than those stemming from real uncertainty shocks (−0.8% versus −0.4%) due to a larger extent of financial friction. The contribution of US financial uncertainty shocks, vis-à-vis US real uncertainty shocks, to the Euro area is quantitatively more important.

Citation

Bakkar, Y., Nilavongse, R., & Saha, A. K. (2021). Spillovers of the US real and financial uncertainty on the Euro area. Applied Economics Letters, 28(15), 1249-1258. https://doi.org/10.1080/13504851.2020.1808166

• Journal Article Type: Article
• Online Publication Date: Aug 19, 2020
• Publication Date: Sep 2, 2021
• Deposit Date: Jun 2, 2023
• Journal: Applied Economics Letters
• Print ISSN: 1350-4851
• Electronic ISSN: 1466-4291
• Publisher: Routledge
• Peer Reviewed: Peer Reviewed
• Volume: 28
• Issue: 15
• Pages: 1249-1258
• DOI: https://doi.org/10.1080/13504851.2020.1808166
• Keywords: Economics and Econometrics
• Additional Information: Peer Review Statement: The publishing and review policy for this title is described in its Aims & Scope.; Aim & Scope: http://www.tandfonline.com/action/journalInformation?show=aimsScope&journalCode=rael20; Published: 2020-08-19