Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/193587
Authors: 
Hauzenberger, Niko
Böck, Maximilian
Pfarrhofer, Michael
Stelzer, Anna
Zens, Gregor
Year of Publication: 
2018
Series/Report no.: 
ESRB Working Paper Series 80
Abstract: 
In this paper we estimate a Bayesian vector autoregressive model with factor stochastic volatility in the error term to assess the effects of an uncertainty shock in the Euro area. This allows us to treat macroeconomic uncertainty as a latent quantity during estimation. Only a limited number of contributions to the literature estimate uncertainty and its macroeconomic consequences jointly, and most are based on single country models. We analyze the special case of a shock restricted to the Euro area, where member states are highly related by construction. We find significant results of a decrease in real activity for all countries over a period of roughly a year following an uncertainty shock. Moreover, equity prices, short-term interest rates and exports tend to decline, while unemployment levels increase. Dynamic responses across countries differ slightly in magnitude and duration, with Ireland, Slovakia and Greece exhibiting different reactions for some macroeconomic fundamentals.
Subjects: 
Bayesian vector autoregressive models
factor stochastic volatility
uncertainty shocks
JEL: 
C30
F41
E32
ISBN: 
978-92-9472-046-7
Document Type: 
Working Paper
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