Analyses | 25 July 2003

Changes in equity risk perceptions: global consequences and policy responses

The current weakness in the global economy has generated a debate on the likely outlook for the world economy and the appropriate response for monetary policies. 

Warwick McKibbin

  • Warwick McKibbin

The current weakness in the global economy has generated a debate on the likely outlook for the world economy and the appropriate response for monetary policies. 

Warwick McKibbin

  • Warwick McKibbin
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Executive Summary

The world economy is currently being buffeted by a number of major shocks. A particular feature has been the large fall in equity markets in many countries. In this paper we use the MSG3 global economic model to assess the impact on the global economy of a sharp rise in the equity risk premium in a number of countries.