Objective Government policies - fiscal, monetary, and regulatory - define the rules of the game for economic agents. However, uncertainty about policy changes may affect the economy adversely as it acts as an additional source of risk. In an interconnected world economy, policy uncertainty has spillover effects beyond national borders, and becomes a global source of risk. In this context, this project investigates the relationship between global policy uncertainty - the common driver of uncertainty across countries - and international financial markets. In the aftermath of the financial crisis, it is timely and relevant to deepen our understanding of these relationships. This may, in turn, inform the development of policies that minimize the adverse impacts of uncertainty, particularly in regions of high economic integration as the Euro zone. First, I assemble a multi-country panel dataset that combines measures of country-level policy uncertainty with a variety of financial instruments. I construct a new measure of global policy uncertainty and document its correlation with the term structure, volatility, and other characteristics of assets. Next, I develop a multi-country general equilibrium asset-pricing model in which unobserved government actions affect productivity. As a novel feature, I introduce asymmetric information: residents of a country have superior knowledge about their government's actions compared to foreigners. Global policy uncertainty arises from fundamental risks and information heterogeneity, and it is priced in equilibrium. I use the model to measure the importance of global and country-level uncertainty as asset pricing determinants, and to quantify the impact of uncertainty-reducing strategies such as increasing government transparency. The project links international finance, asset pricing, and macroeconomics, and contributes to an active literature on the consequences of policy uncertainty by exploring its international dimensions. Fields of science social scienceseconomics and businesseconomicsmacroeconomicssocial scienceseconomics and businesseconomicsproduction economicsproductivitysocial sciencespolitical sciencespolitical policiesforeign policysocial scienceseconomics and businessbusiness and managementemploymentsocial scienceseconomics and businessbusiness and managementcommerce Programme(s) H2020-EU.1.3. - EXCELLENT SCIENCE - Marie Skłodowska-Curie Actions Main Programme H2020-EU.1.3.2. - Nurturing excellence by means of cross-border and cross-sector mobility Topic(s) MSCA-IF-2015-EF - Marie Skłodowska-Curie Individual Fellowships (IF-EF) Call for proposal H2020-MSCA-IF-2015 See other projects for this call Funding Scheme MSCA-IF-EF-ST - Standard EF Coordinator UNIVERSIDAD POMPEU FABRA Net EU contribution € 158 121,60 Address Placa de la merce, 10-12 08002 Barcelona Spain See on map Region Este Cataluña Barcelona Activity type Higher or Secondary Education Establishments Links Contact the organisation Opens in new window Website Opens in new window Participation in EU R&I programmes Opens in new window HORIZON collaboration network Opens in new window Other funding € 0,00
