THE INTERNATIONAL TRANSMISSION OF VOLATILITY SHOCKS: AN EMPIRICAL ANALYSIS. Issue 3 (31st October 2014)

• Record Type: Journal Article
• Authors: Mumtaz, Haroon; Theodoridis, Konstantinos
• Is Part Of: Journal of the European Economic Association. Volume 13:Issue 3(2015:Jun.)
• Page Start: 512
• Page End: 533
• Publication Date: 2014-10-31
• Subjects: Economics -- Periodicals; Économie politique -- Périodiques; Science économique; Périodique électronique (Descripteur de forme); Ressource Internet (Descripteur de forme); 330
• DOI: 10.1111/jeea.12120
• Languages: English
• ISSNs: 1542-4766

Abstract

<abstract abstract-type="main"> <title>Abstract</title> <p>This paper proposes an empirical model which can be used to estimate the international transmission of volatility shocks. Using this model we estimate that a one standard deviation increase in the volatility of the shock to US real GDP leads to a decline in UK GDP of 1% relative to trend and a 0.7% increase in UK CPI relative to trend at the two‐year horizon. Using a nonlinear open‐economy DSGE model, we find that these empirical estimates are consistent with the response to a perturbation to the volatility of foreign "supply" type shocks, while an increase in the volatility of demand shocks has a negligible impact.</p> </abstract>