Impact of uncertainty shocks on the global economy

Abstract

Uncertainty shocks originating in emerging markets or stemming from specific policies in advanced economies can have major repercussions for the global economy. It is important to invest in studying the issues of uncertainty in an open economy, as certain key variables of the global economy (such as capital flows and exchange rates) appear especially vulnerable to uncertainty shocks. This special issue gathers some recent papers on the topic but obviously a lot remains to be done as regards research in this area, in order for example to disentangle the channels of cross-border spillovers from uncertainty shocks. Building theoretical models to properly account for such transmission of shocks is challenging. Last, one of the empirical difficulties economists face is how to clearly identify uncertainty shocks given that they often occur in parallel with other shocks, notably financial ones. Those issues are clearly topics for future research.