New research published by the Bank of Lithuania adds to a growing body of evidence that US monetary policy uncertainty impacts the rest of the world.

To explore the effects of US policy uncertainty, Povilas Lastauskas and Anh Dinh Minh Nguyen augment a global vector autoregressive framework with two new features. They add time-varying variance of local structural shocks, and allow a dynamic interaction between endogenous variables and time-varying volatility.

The working paper highlights how