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We propose a vector autoregression with common stochastic volatility in mean (VAR-CSVM) dynamics to estimate the transmission of domestic and international sources of macroeconomic uncertainty shocks in three small open economies (SOEs): Australia, Canada, and New Zealand. We find evidence that international uncertainty spillovers shape the macroeconomic conditions in all three SOEs; that domestic uncertainty shocks have idiosyncratic transmission mechanisms in each SOE; and that accounting for uncertainty within the VAR-CSVM improves point and density forecast accuracy compared to the nested VAR-CSV and homoscedastic VAR models.

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International Transmission of Macroeconomic Uncertainty in Small Open Economies: An Empirical Approach

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  • 发表日期：

    2025年

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  • Jamie L. Cross,
  • Chenghan Hou,
  • Aubrey Poon

摘要

We propose a vector autoregression with common stochastic volatility in mean (VAR-CSVM) dynamics to estimate the transmission of domestic and international sources of macroeconomic uncertainty shocks in three small open economies (SOEs): Australia, Canada, and New Zealand. We find evidence that international uncertainty spillovers shape the macroeconomic conditions in all three SOEs; that domestic uncertainty shocks have idiosyncratic transmission mechanisms in each SOE; and that accounting for uncertainty within the VAR-CSVM improves point and density forecast accuracy compared to the nested VAR-CSV and homoscedastic VAR models.