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Good and bad uncertainty propagation across the global economy

16th National Competition for Economic Research Grants

International economics

Senior Researcher : Helena Chuliá Soler

Research Centre or Institution : Universidad de Barcelona.


The aim of the project has been to explore the effects associated with uncertainty shocks on financial markets and macroeconomic variables. As a result, 5 articles have been published in refereed international journals.

The first article answers the question: How does capital market integration influence the distribution of consumption risk? We show that, while there is a decoupling between individual consumption growth and global risk sharing after episodes of "bad" integration, we observe a recovery after episodes of "good" integration.

The second paper explores the effect of uncertainty on economic activity and financial asset prices. We show that the notion of uncertainty, which is often empirically assimilated to a second conditional moment, is more closely related to what we identify as "unexpected bad uncertainty". Other general notions of uncertainty show an effect that does not always coincide with theoretical models.

The third paper explores the effect of financial uncertainty on commonality in liquidity. The results show evidence of a changing causal relationship over time between global common liquidity in international asset markets and global uncertainty.

The fourth paper analyses the propagation of downside risk in global foreign exchange markets and how it relates to liquidity. We document significant asymmetries in the propagation of uncertainty.

Finally, the fifth paper examines the asymmetric impact of systemic liquidity on asset prices across market states. Our results show that liquidity is only relevant in explaining stock market returns when the market state is particularly good or particularly bad.


Scientific Production
Magazine Articles 5
Communications at national conferences 3
Communications at international conferences 8


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