Volatility Risk Pass-Through

Mariano Croce, Ric Colacito, Yang Liu () and Ivan Shaliastovich

No 13325, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: Volatility pass-through; Foreign exchange disconnect; Risk sharing (search for similar items in EconPapers)
JEL-codes: C62 F31 G12 (search for similar items in EconPapers)
Date: 2018-11
New Economics Papers: this item is included in nep-rmg
References: Add references at CitEc
Citations: View citations in EconPapers (14)

Downloads: (external link)
https://cepr.org/publications/DP13325 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Working Paper: Volatility Risk Pass-through (2018)
Working Paper: Volatility Risk Pass-Through (2016)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:13325

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP13325

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().