This paper examines the transmission of U.S. financial uncertainty to Mexico, modeled as a small open emerging economy. To analyze these spillovers, it develops a non-linear two-country New Keynesian DSGE model with an endogenous sovereign risk premium and evaluates its implications against empirical Structural Vector Autoregression (SVAR) evidence. The empirical results show that a U.S. financial uncertainty shock triggers a flight-to-safety episode characterized by equity price declines, currency depreciation, and a persistent contraction in economic activity. The DSGE model replicates these responses and identifies nominal rigidities, sovereign risk premia, and investment adjustment costs as key transmission mechanisms. Counterfactual exercises indicate that greater trade dependence amplifies the effects of foreign uncertainty through exchange-rate pass-through and imported inflation. The analysis also reveals a policy trade-off: while a more aggressive monetary response better stabilizes inflation and exchange-rate dynamics, it does so at the cost of tighter financial conditions, lower asset valuations, and weaker real activity. Overall, the findings highlight the joint role of financial frictions, trade exposure, and monetary policy in shaping emerging-market vulnerability to external financial shocks.

This paper examines the spillover effects of U.S. economic policy uncertainty and financial uncertainty on five major Latin American economies: Mexico, Colombia, Brazil, Argentina, and Chile. Using monthly data through 2023 and country-specific structural vector autoregressions, the analysis traces responses in real activity, financial markets, exchange rates, prices, and bilateral trade. Both uncertainty shocks are followed by declines in stock prices and industrial production across the five economies, although the magnitude and persistence of the responses vary across countries. Financial uncertainty generally produces larger and more persistent responses than economic policy uncertainty, particularly in financial and real activity. The cross-country comparisons reveal distinct patterns of adjustment across economies with different trade relationships with the United States. Mexico and Colombia exhibit relatively strong output responses, whereas Argentina and Brazil, the two Mercosur economies in the sample, experience larger contractions in bilateral trade with the United States. Chile differs from both patterns, displaying comparatively smaller output effects but a distinct increase in inflation and interest rates following financial uncertainty. Overall, the findings show that U.S. uncertainty affects Latin American economies through real, financial, and trade margins, while the relative importance of these adjustments differs across countries.

This paper investigates the heterogeneous spillover effects of U.S. uncertainty shocks on emerging market economies using a Panel Vector Autoregression (PVAR). While U.S. uncertainty triggers a synchronized contraction across all emerging markets, the transmission mechanism varies critically by region. Latin American economies exhibit structural vulnerability, characterized by a procyclical “fear of floating” monetary response to defend against exchange rate pass-through. This sensitivity is amplified by deep vertical integration with U.S. trade, making the region uniquely sensitive to cross-border supply chain disruptions. In contrast, Asian economies display relative resilience, supported by countercyclical policy space and the positive supply shock derived from net energy imports. These findings suggest that structural idiosyncrasies, specifically trade composition and monetary credibility, are the dominant determinants of cross-border spillovers.

This paper examines the domestic and international macroeconomic effects of trade policy uncertainty (TPU) shocks between the United States and China. While the domestic consequences of uncertainty are well documented, less is known about the bilateral transmission of trade policy uncertainty between the world's two largest economies. Using Structural Vector Autoregression (SVAR) and Local Projections (LP), this study estimates the dynamic responses of output, investment, consumption, international trade, interest rates, the real effective exchange rate, and financial markets to both domestic and foreign TPU shocks. The results reveal substantial international spillover effects that frequently match or exceed the corresponding domestic responses. U.S. TPU shocks generate significant and persistent declines in Chinese investment, trade, and financial market performance, while TPU shocks originating in China exert pronounced contractionary effects on U.S. investment, international trade, and financial markets. Financial markets and exchange rates respond almost immediately to uncertainty shocks, whereas real economic activity adjusts more gradually over subsequent quarters. These findings suggest that trade policy uncertainty propagates across borders through trade, financial, and exchange-rate channels, underscoring the importance of accounting for international spillovers when evaluating the macroeconomic consequences of trade policy uncertainty.

Who Bears Uncertainty? Heterogeneous Labor Outcomes

This paper analyzes the effects of U.S. uncertainty shocks on labor market outcomes across different groups: gender, ethnicity, and educational attainment. Using a structural vector autoregression (SVAR) model from 1990M1 to 2023M12, results show that uncertainty shocks significantly affect aggregate economic activity while unemployment and labor force participation rates experience persistent adverse effects. Notably, the findings show considerable disparities in the responses of different demographic groups. Women experience slightly higher increases in unemployment than men, which could reflect gender-specific vulnerabilities, especially during the COVID-19 pandemic. Additionally, non-White workers face higher chances of job losses and larger declines in labor force participation. Lastly, those with lower educational attainment, particularly high school graduates, experience greater negative impacts compared to those with bachelor's degrees or more.