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  • "Uncertainty and Economic Activity: A Multi-Country Perspective", by Ambrogio Cesa-Bianchi, M. Hashem Pesaran and Alessandro Rebucci, forthcoming in The Review of Financial Studies, June 2019

    Abstract: This paper develops an asset pricing model with heterogeneous exposure to a persistent world growth factor to identify global growth and financial shocks in a multi-country panel VAR model for the analysis of the relationship between volatility and the business cycle. The econometric estimates yield three sets of empirical results regarding (i) the importance of global growth for the interpretation of the correlation between volatility and growth over the business cycle and the possible presence of omitted variable bias in single-country VARs studies, (ii) the extent to which output shocks drive volatility, and (iii) the transmission of volatility shocks to output growth.
    JEL Classifications: E44, F44, G15
    Key Words: Uncertainty, Business Cycle, Global Shocks, Multi-Country Asset Pricing Model, Panel VAR, Identification, Realized Volatility, Impulse Responses.
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