Title
A Comparative Assessment of the Global Effects of US Monetary and Fiscal Policy Uncertainty Shocks
Authors
Abstract
We employ the Global Vector Autoregressive (GVAR) model to trace the propagation effects of both U.S. monetary and fiscal policy uncertainty shocks on real equity prices and real gross domestic product of 32 advanced and emerging countries (besides the U.S.). Using quarterly data over 1985Q1 to 2019Q4, our findings reveal a higher response of advanced markets than emerging counterparts to a unit shock to both U.S. fiscal and monetary policy uncertainties. However, regardless of the market classification, we show that real equity prices respond more to monetary policy uncertainty shock than real gross domestic product while the reverse holds for fiscal policy uncertainty shock. Our results offer important implications for investment and policy decisions.
Keywords
Fiscal Policy Uncertainty, Monetary Policy Uncertainty, Real equity prices, Real Gross Domestic Product, GVAR Model, US
Classification-JEL
C32, E63 G15, O47
Pages
89-114