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The role of uncertainty, sentiment and cross-country interactions in G7 output dynamics

Garratt, Anthony; Lee, Kevin; Shields, Kalvinder

Authors

Anthony Garratt

KEVIN LEE kevin.lee@nottingham.ac.uk
Professor of Economics

Kalvinder Shields



Abstract

Output fluctuations in the G7 are characterised using a VAR model of countries' actual and expected outputs and uncertainty over these. New measures are developed to quantify the relative importance of economic prospects-versus-uncertainty, global-versus-national effects and fundamentals-versus-sentiment for countries' persistent output movements. National and global contributions are found to be equally important across the G7 although considerable differences exist between countries. Uncertainty, and especially cross-country uncertainty, is important in propagating the effects of shocks and generates around 20% of countries' persistent output movements on average. Fundamentals dominate output movements although, with an 80:20 split, sentiment plays a non-negligible role.

Journal Article Type Article
Publication Date May 3, 2018
Journal Canadian Journal of Economics
Print ISSN 0008-4085
Electronic ISSN 1540-5982
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 51
Issue 2
APA6 Citation Garratt, A., Lee, K., & Shields, K. (2018). The role of uncertainty, sentiment and cross-country interactions in G7 output dynamics. Canadian Journal of Economics / Revue Canadienne d'Économique, 51(2), https://doi.org/10.1111/caje.12325
DOI https://doi.org/10.1111/caje.12325
Keywords Uncertainty, Sentiment, Fundamentals, Survey Expectations, Global Shocks, National Shocks
Publisher URL https://onlinelibrary.wiley.com/doi/abs/10.1111/caje.12325
Copyright Statement Copyright information regarding this work can be found at the following address: http://eprints.nottingh.../end_user_agreement.pdf
Additional Information This is the peer reviewed version of the following article, which has been published in final form at https://onlinelibrary.w...abs/10.1111/caje.12325. This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.

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Copyright Statement
Copyright information regarding this work can be found at the following address: http://eprints.nottingham.ac.uk/end_user_agreement.pdf





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