Asymmetric impact of uncertainty in recessions: are emerging countries more vulnerable?
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Pratiti Chatterjee
Abstract
This paper asks two questions “Does there exist heterogeneity in the response of macro variables to uncertainty shocks across advanced and emerging countries? and, “How important is the state of the economy for the effects of an uncertainty shock?. I analyze the recession-specific effects of uncertainty for a sample of 8 countries – the US, UK, France, Canada, Mexico, Chile Argentina, and South Korea. The results emphasize asymmetries along two dimensions – (1) An uncertainty shock disproportionately increases the depth and duration of a recession for an emerging country vis-
Acknowledgement
I am grateful to Fabio Milani and Eric Swanson for their extensive guidance and research advice. I would like to thank the editor Bruce Mizrach, Jeremy Piger and two anonymous referees whose comments allowed me to improve my paper. I am grateful to the organizers of the 24th Annual Symposium of the Society for Nonlinear Dynamics and Econometrics for awarding this paper the James B. Ramsey student prize. I would like to thank the participants of the 24th Annual Symposium of the Society for Nonlinear Dynamics and Econometrics and the Fall 2016 Midwest Macro Meeting for helpful comments and discussions.
Appendix
Data Definitions.
| Country | GDP – Total | Gross fixed capital formation | Private consumption expenditure | GDP deflator | Exports of goods and services | Imports of goods and services | Interest rate | Uncertainty |
|---|---|---|---|---|---|---|---|---|
| US (1986Q1–2014Q2) | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | Effective Federal Funds Rate – FRED | CBOE VIX |
| UK (1979Q1–2014Q3) | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | 3-Month or 90-day Rates and Yields: Treasury Securities for the UK – FRED | FTSE Composite Index |
| Canada (1990Q1–2014Q4) | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | Not Used | Composite Index Toronto Stock Exchange |
| France (1991Q1–2014Q4) | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | Not Used | Stock Market Index – SBF 250 Index |
| South Korea (1975Q1–2014Q4) | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | Not Used | Korea Stock Exchange – Kospi Composite Index |
| Mexico (1993Q1–2014Q2) | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | 3-Month or 90-day Rates and Yields: Treasury Securities for Mexico – FRED | Mexican Stock Exchange: Bolsa IPC |
| Chile (1996Q1–2014Q4) | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | OECD Main Economic Indicators | Not Used | Santiago Stock Exchange- IGPA Index |
| Argentina (1994Q3–2012Q2) | IMF, International Financial Statistics (IFS) | IMF, International Financial Statistics (IFS) | IMF, International Financial Statistics (IFS) | IMF, International Financial Statistics (IFS) | IMF, International Financial Statistics (IFS) | IMF, International Financial Statistics (IFS) | Not Used | Buenos Aires Stock Exchange – Merval Index |
Variables reported are seasonally adjusted and recorded in local currency units.
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Supplementary Material
The online version of this article offers supplementary material (DOI: https://doi.org/10.1515/snde-2016-0148).
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Artikel in diesem Heft
- Research Articles
- A unified framework jointly explaining business conditions, stock returns, volatility and “volatility feedback news” effects
- Efficient estimation of financial risk by regressing the quantiles of parametric distributions: An application to CARR models
- A parametric stationarity test with smooth breaks
- Regression discontinuity designs with unknown state-dependent discontinuity points: estimation and testing
- Foster-Hart optimization for currency portfolios
- Asymmetric impact of uncertainty in recessions: are emerging countries more vulnerable?
Artikel in diesem Heft
- Research Articles
- A unified framework jointly explaining business conditions, stock returns, volatility and “volatility feedback news” effects
- Efficient estimation of financial risk by regressing the quantiles of parametric distributions: An application to CARR models
- A parametric stationarity test with smooth breaks
- Regression discontinuity designs with unknown state-dependent discontinuity points: estimation and testing
- Foster-Hart optimization for currency portfolios
- Asymmetric impact of uncertainty in recessions: are emerging countries more vulnerable?
