Volatility Risk Pass-through / Riccardo Colacito, Mariano Max Croce, Yang Liu, Ivan Shaliastovich.

Format:

Book

Author/Creator:

Colacito, Riccardo.

Contributor:

National Bureau of Economic Research.

Croce, Mariano M.

Liu, Yang.

Shaliastovich, Ivan.

Series:

Working Paper Series (National Bureau of Economic Research) no. w25276.

NBER working paper series no. w25276

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2018.

Summary:

We develop a novel measure of volatility pass-through to assess international propagation of output volatility shocks to macroeconomic aggregates, equity prices, and currencies. An increase in country's output volatility is associated with a decrease in its output, consumption, and net exports. The average consumption pass-through is 50% (a 1% increase in output volatility increases consumption volatility by 0.5%) and it increases to 70% for shocks originating in smaller countries. The equity volatility pass-through is 90%, whereas the link between volatility of currency and fundamentals is weak. A novel channel of risk sharing of volatility risks can explain our empirical findings.

Notes:

Print version record

November 2018.