We estimate a quantile structural vector autoregressive model for the Euro area to assess the real effects of uncertainty shocks in expansions and recessions using monthly data covering the period of 1999:02–2016:05. Domestic and foreign (US) uncertainty shocks hitting during recessions are found to produce a relatively overall stronger negative impact on output growth than in expansions, with US shocks having more pronounced effects. Inflation, in general, is unaffected from a statistical perspective. Our results tend to suggest that policymakers need to implement state-dependent policies, with stimulus policies being more aggressive during recessions—something we see from our results in terms of stronger declines in the interest rate during bad times.
Gupta, R., Lau, C. K. M., & Wohar, M. E. (2019). The impact of US uncertainty on the Euro area in good and bad times: evidence from a quantile structural vector autoregressive model. Empirica, 46(2), 353-368. https://doi.org/10.1007/s10663-018-9400-3