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

Garratt, Anthony; Lee, Kevin; Shields, Kalvinder


Anthony Garratt

Professor of Economics

Kalvinder Shields


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.


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),

Journal Article Type Article
Acceptance Date Mar 28, 2017
Online Publication Date May 3, 2018
Publication Date May 3, 2018
Deposit Date Apr 19, 2017
Publicly Available Date May 4, 2020
Journal Canadian Journal of Economics
Print ISSN 0008-4085
Electronic ISSN 1540-5982
Publisher Wiley
Peer Reviewed Peer Reviewed
Volume 51
Issue 2
Keywords Uncertainty, Sentiment, Fundamentals, Survey Expectations, Global Shocks, National Shocks
Public URL
Publisher URL
Additional Information This is the peer reviewed version of the following article, which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.


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