Volatility Spillovers and the Global Financial Cycle Across Economies: Evidence from a
Global Semi-Structural Model

Gómez-Pineda, Javier G.

Volatility Spillovers and the Global Financial Cycle Across Economies: Evidence from a Global Semi-Structural Model

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Borradores de Economía; No. 1011

Date published

2017-09-05

Date

2020-03-03

Authors

Gómez-Pineda, Javier G.

Document language

eng

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Las opiniones contenidas en el presente documento son responsabilidad exclusiva de los autores y no comprometen al Banco de la República ni a su Junta Directiva.

The opinions contained in this document are the sole responsibility of the author and do not commit Banco de la República or its Board of Directors.

Abstract

The paper provides some evidence on the relevance of global uncertainty and risk aversion and the lesser importance of US interest rates for the global financial and business cycles. As framework, we use a global semi-structural model augmented with financial and trade inter-linkages. Financial interlinkages are modelled with proposed global uncertainty, global risk aversion and global financial cycle channels. Trade interlinkages are modelled with proposed value-chain trade equations. We find that global uncertainty and global risk aversion are, by far, the main volatility factors in all economies. Other volatility factors such as US interest rates, foreign interest rates and trade-related factors rarely explain shares of forecast error variance above one percent.