The impacts of uncertainty shocks on the Global Financial Cycle: a multiperspective SVAR analysis

reservedThis thesis aims to investigate the role of global uncertainty shocks in affecting the Global Financial Cycle (GFC). Three kinds of uncertainty are considered: financial uncertainty, the uncertainty surrounding economic policies and the geopolitical uncertainty. The contribution and the impact of each uncertainty shock is assessed through a SVAR analysis, that employs multiple sets of identification strategies and estimation techniques. Specifically, the uncertainty shocks are identified alternatively with the Cholesky decomposition technique and with the Penalty Function Approach, whereas the VAR models are estimated by means of OLS and Bayesian estimations. We find that the three uncertainty measures have heterogenous effects on the GFC, which are substantially negative and depend on the underlying econometric specification. However, financial uncertainty, as measured by the Global Financial Uncertainty indicator, proves to be the most important driver of GFC, since its shock explains the highest percentage of variance of GFC and triggers the most relevant reaction in GFC in every econometric specification.This thesis aims to investigate the role of global uncertainty shocks in affecting the Global Financial Cycle (GFC). Three kinds of uncertainty are considered: financial uncertainty, the uncertainty surrounding economic policies and the geopolitical uncertainty. The contribution and the impact of each uncertainty shock is assessed through a SVAR analysis, that employs multiple sets of identification strategies and estimation techniques. Specifically, the uncertainty shocks are identified alternatively with the Cholesky decomposition technique and with the Penalty Function Approach, whereas the VAR models are estimated by means of OLS and Bayesian estimations. We find that the three uncertainty measures have heterogenous effects on the GFC, which are substantially negative and depend on the underlying econometric specification. However, financial uncertainty, as measured by the Global Financial Uncertainty indicator, proves to be the most important driver of GFC, since its shock explains the highest percentage of variance of GFC and triggers the most relevant reaction in GFC in every econometric specification