Foreign and Domestic Uncertainty Shocks in Four Open Economies

This paper investigates how the economic performance of four economies with floating exchange rates is affected by shocks in domestic and US policy uncertainty. We estimate a Bayesian VAR model describing dynamics ten local variables for each countries use it to evaluate response system structural shocks. The analysis reveals that increased uncertainty reduces industrial output all analysed, while effect varies across economies. A key finding concerns role rate. Whereas real effective rate amplifies US, typically helps absorb open asymmetry may reflect as safe haven times