Does US Financial Uncertainty Spill Over through the (Asymmetric) International Credit Channel? The Role of Market Expectations

15:40-17:00, Friday, May 10, 2024

I-206, Boxue Building, DUFE

Dr. Yufan Huang is an associate professor of International School of Economics and Management, Capital University of Economics and Business. He received a bachelor's degree in economics from National Chengchi University (Taiwan) in 2004, a master's degree in economics from National Taiwan University in 2006, and a doctorate degree in economics from the University of Washington (Seattle) in 2013. His research focuses on empirical macroeconomics, nonlinear time series, and Bayesian methods, and his research has been published in the Journal of Money, Credit & Banking, International Journal of Forecasting, International Review of Economics & Finance, and Oxford Bulletin of Economics and Statistics and other internationally renowned journals.

We show that the international credit channel is an important channel through which US financial uncertainty spills over internationally. Moreover, we find the asymmetric responses of domestic and international credit conditions to US financial uncertainty shocks, contingent upon market participants'expectations. During periods of pessimism regarding future economic conditions, the impact of US financial uncertainty on both domestic and international credit conditions intensifies significantly, leading to a severe global economic slowdown. Elevated US financial uncertainty disproportionately affects the left tails of the distribution more than the right tails, heightening the likelihood of negative global output growth. Conversely, in times of optimism, heightened US financial uncertainty exerts modest effects on international credit conditions and global economic conditions. Yet it stretches the conditional distribution substantially, signaling an increasingly uncertain future.

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