Essays on Uncertainty and Economy

"In this paper I attempt to study how fluctuations in uncertainty, due to pure financial shocks, impact real economy variables in an OECD network. The two questions I specifically look into are 1) How do fluctuations in uncertainty in country X impact real economy variables in country X? 2) How does the fluctuation in uncertainty in country X impact the uncertainty and real economy variables in country Y i.e. investigating the spillovers? Especially since the connectedness via equity market volatility and it's direction has been established in the literature. My work is linked to a large empirical literature that studies the relationship between volatility and the macro-economy - using VARs with recursive identification, to measure the effects of volatility shocks on the economy. However this paper is novel in it's contribution to understanding spillover effects of uncertainty fluctuations arising due to underlying financial shocks in a network of countries – which as far as I know has not been attempted in the literature before. This has important policy implications and helps understand how uncertainty shocks work in the bigger picture. Most of the uncertainty work has been focused on U.S specifically, which limits the understanding of how uncertainty shocks impacts in a world where financial contagion has been a persistent feature.

PhD Director(s):
Ugo Panizza
Jury member(s): Rahul Mukherjee

 Record created 2017-05-11, last modified 2018-01-29

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