Working Paper

The Global Effects of Covid-19-Induced Uncertainty

Giovanni Caggiano, Efrem Castelnuovo, Richard Kima
CESifo, Munich, 2020

CESifo Working Paper No. 8280

We estimate a three-variate VAR using proxies of global financial uncertainty, the global financial cycle, and world industrial production to simulate the effects of the jump in financial uncertainty observed in correspondence of the Covid-19 outbreak. We predict the cumulative loss in world output one year after the uncertainty shock due to Covid-19 to be about 14%.

CESifo Category
Fiscal Policy, Macroeconomics and Growth
Monetary Policy and International Finance
Keywords: Covid-19, financial uncertainty, vector autoregressions, global financial cycle, world industrial production
JEL Classification: C320, E320