Abstract:
We analyze the convergence of a news-based measure of uncertainty across 143 countries (spanning 99 percent of
world GDP) over the quarterly period of 1996Q1 to 2018Q3. We apply a panel data-based unit root test, which
controls both nonlinearity and cross-sectional dependence, to the ratio of the uncertainty of individual countries
relative to that of global uncertainty. We find overwhelming evidence of stationarity in 141 of the cross-sectional units,
leading to a rejection of the null of a unit root for the entire panel. Our results provide strong evidence of convergence
and hence, the spillover of uncertainty across the economies of the world. Given this, policymakers need to be alert all
the time to counteract the negative impact on the domestic economy in the wake of uncertainty increases around the
world.
