The international transmission of volatility shocks: an empirical analysis

Mumtaz, Haroon and Theodoridis, Konstantinos ORCID: https://orcid.org/0000-0002-4039-3895 2015. The international transmission of volatility shocks: an empirical analysis. Journal of European Economic Association 13 (3) , pp. 512-533. 10.1111/jeea.12120

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Abstract

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.

Item Type:	Article
Date Type:	Publication
Status:	Published
Schools:	Schools > Business (Including Economics)
Publisher:	Oxford University Press
ISSN:	1542-4766
Last Modified:	24 Oct 2022 07:46
URI:	https://orca.cardiff.ac.uk/id/eprint/115876

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