Credit Intermediation and the Transmission of Macro-Financial Uncertainty: International Evidence

This figure depicts our macro-financial uncertainty measure, additionally reporting contributions of macroeconomic and financial market variables. We also highlight NBER-recessions in gray and indicate and label certain economic events of global influence by a red line.


This paper introduces a novel measure of global macro-financial uncertainty and examines the state-dependent transmission of uncertainty to economic activity. We show that global uncertainty shocks have adverse and non-linear macroeconomic effects, with the non-linearity being driven by different levels of country-specific banking sector distress. Both macroeconomic and financial market uncertainty are associated with lower economic activity, with the latter exerting stronger growth effects. State-dependency of the effect is prevalent in both cases. Our findings have important policy implications, highlighting both the state of the banking sector as well as the origin of uncertainty as crucial factors in the transmission of uncertainty.

Journal of International Money and Finance, 108