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The effects of economic policy uncertainty on European economies: evidence from a TVP-FAVAR

  • Jan Prüser
  • Alexander SchlösserEmail author
Article
  • 83 Downloads

Abstract

We use a time-varying parameter FAVAR model to investigate the effects of economic policy uncertainty (EPU) on a wide range of macroeconomic variables for eleven European Monetary Union (EMU) countries. First, we are able to distinguish between a group of fragile countries (GIIPS countries) and a group of stable countries (northern countries), where the former suffered the most due to EPU shocks. Second, we find that EPU shocks affect financial markets as well as the real economy and that private investors and financial market participants react more sensitively than consumers to EPU shocks. Third, we discover that the transmission of EPU shocks is quite stable over time.

Keywords

TVP-FAVAR Economic policy uncertainty Fat data Hyperparameter European Monetary Union Hierarchical prior 

JEL Classification

C11 C32 E20 E60 

Notes

Compliance with ethical standards

Conflict of interest

Jan Prüser and Alexander Schlösser declare that they have no conflict of interest.

Human participants or animals performed

This article does not contain any studies with human participants or animals performed by any of the authors.

Supplementary material

181_2018_1619_MOESM1_ESM.pdf (584 kb)
Supplementary material 1 (pdf 583 KB)

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Copyright information

© Springer-Verlag GmbH Germany, part of Springer Nature 2019

Authors and Affiliations

  1. 1.Faculty of Economics and Business AdministrationUniversity of Duisburg-EssenEssenGermany
  2. 2.Ruhr Graduate School in EconomicsRWI - Leibniz Institute for Economic ResearchEssenGermany

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