Dynamic spillovers in the United States : stock market, housing, uncertainty, and the macroeconomy

Abstract

In this study we examine dynamic macroeconomic spillovers in the United States, with a particular focus on the stock market, housing and economic policy uncertainty (EPU). Based on monthly data over the period 1987M1 to 2014M11, our ndings reveal the following features. First, the transmission of various types of shocks contributes signi cantly to economic uctuations in the United States. Second, spillovers show large variations over time. Third, in the wake of the global nancial crisis, spillovers have been exceptionally high in historical perspective. In particular, we nd large spillovers from EPU, as well as stock market and housing returns to other variables, in particular in ation, industrial production and the federal funds rate. These results illustrate the contagion from the housing and nancial crisis to the real economy and the strong policy reaction to stabilise the economy.