Fluctuations in Global Macro Volatility
AbstractThis paper investigates the dynamics, propagation and drivers of macroeconomic volatility from an global perspective. A hierarchical volatility factor model is designed to estimate and decompose the time-varying volatility of output growth across countries into global, regional, and idiosyncratic components. We find that the global volatility component has been systematically declining over time, which is consistent
with a "global moderation" pattern of international business cycles. However, the influence of such global component on the output volatility across countries significantly increased since the Great Recession. The volatility of exchange rate and total factor productivity, along with the level of trade openness, seem to be the main explanatory factors of changes in output volatility worldwide.