Macroeconomic effects of global uncertainty: A comparative analysis

The fact that the world economies have reached a higher level of globalization in economic, social and political terms makes countries more sensitive to the problems that arise on a global scale. This process causes countries to be more exposed to the harmful effects of common global uncertainty shocks in addition to the uncertainties arising from their own internal dynamics. In this study, the macroeconomic effects of global uncertainty were investigated. In the study, the effects of global uncertainty on output, investments, household consumption expenditures, exports and consumer price index were analyzed. The data set used in the analysis consists of annual data of G7 countries, emerging market economies and low-income countries covering the period 1990-2019. According to the CS-ARDL estimation results, global uncertainty negatively affects investments and exports in the G7 countries in the short-run. However, no significant effects were found in the long-run. In emerging market economies and low-income countries, global uncertainty has long-run negative effects on output, investments and exports. The effects on consumption and price level for all country groups are statistically insignificant. Empirical findings show that the macroeconomic effects of global uncertainty emerge through output, investments and exports. Nevertheless, the obtained results indicate that developed countries are less affected by global uncertainty shocks.