Identifying Uncertainty Shocks Using the Price of Gold

Abstract

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Credit intermediation and the transmission of macro-financial uncertainty: International evidence

“…At the same time, at the global level, it should be, to a large extent, contemporaneously predetermined with respect to country level banking sector distress, which supports our identification assumptions. The responses of annual GDP growth to a surge in the Piffer and Podstawski (2018) uncertainty measure by one standard deviation exhibit patterns that are consistent with our baseline results, thus confirming the significance of the effects of uncertainty on the state of the banking sector.…”

“…To support the generality of our results, we also confirm the validity of our results by considering other measures of uncertainty, including the uncertainty indices proposed byDavis (2016),Ludvigson et al (2019) andPiffer and Podstawski (2018).…”

“…Second, we apply our estimation methodology using a proxy for global uncertainty put forward by Piffer and Podstawski (2018), shown in Panel B of Figure 7. They measure uncertainty using the variations in the price of gold around events associated with unexpected changes in uncertainty.…”

Should Gold Be Held Under Global Economic Policy Uncertainty?

“…In turn, there are several factors that can be taken into account as indicators of uncertainty in economic policy, and among them, GP has been considered as the most significant (Raza et al, 2018). The price of gold can be used as an efficient tool to identify the uncertainty shocks (Piffer & Podstawski, 2016). The positive gold shocks may increase the probability of being in the high-uncertainty regime (Zhou et al, 2017).…”

“…To begin with, the previous studies mainly investigate the causal relationship between GP and EPU of one country. It is widely believed that gold can be considered as a global hedge or a safe haven asset (Piffer & Podstawski, 2016), so the price of gold is affected by GEPU. This paper is a pioneering effort to probe the causal relationships between GEPU and GP.…”