Abstract

In a forward looking economy, markets and policy makers have to account for prevailing uncertainty about the future development of macroeconomic key variables, including interest rates, asset prices, output and inflation. Facing the economic turbulences stirred by the Great Recession and the ongoing sovereign debt crisis in the Euro area, the transmission of macroeconomic uncertainty across markets, countries and time is an under-researched issue that may become even more relevant in the future. This project builds on recent approaches in time series econometrics in order to shed new light on the estimation and characterization of macroeconomic uncertainty and its transmission channels. With regard to the estimation of uncertainty, the focus of our analysis lies on the use of mixed-frequency volatility models that are able to include information of both high-frequent market-based and low-frequent survey data. Moreover, recent literature suggests decomposing uncertainty into either “good vs bad” or “informative vs non-informative” components. Advancing on the literature, we try to combine both concepts of uncertainty to get a more complete picture of the transmission and the spillover effects of macroeconomic uncertainty. In our empirical applications, we investigate the transmission of uncertainty not only across countries and markets, but also along the term structure of expectations in order to capture also potential long-run effects of short-run uncertainty.