Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/122085 
Year of Publication: 
2015
Series/Report no.: 
Working Paper No. 752
Publisher: 
Queen Mary University of London, School of Economics and Finance, London
Abstract: 
We use a factor model with stochastic volatility to decompose the time-varying variance of Macro economic and Financial variables into contributions from country-specific uncertainty and uncertainty common to all countries. We find that the common component plays an important role in driving the time-varying volatility of nominal and financial variables. The cross-country co-movement in volatility of real and financial variables has increased over time with the common component becoming more important over the last decade. Simulations from a two-country DSGE model featuring Epstein Zin preferences suggest that increased globalisation and trade openness may be the driving force behind the increased cross-country correlation in volatility.
Subjects: 
FAVAR
Stochastic Volatility
Uncertainty Shocks
DSGE Model
JEL: 
C15
C32
E32
Document Type: 
Working Paper

Files in This Item:
File
Size
835.97 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.