Uncertainty on the world interest rate and on consumption

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Global Uncertainty) Suppose that, for a host of reasons, part of the world suddenly becomes more uncertain (think of wars, political instability, economic crises, etc.). Refer to this group of more uncertain countries as UC. Assume that the increase in uncertainty is manifested in a higher standard deviation of future output. Refer to the rest of the world as ROW. Analyze the effect of this increase in uncertainty on the world interest rate and on consumption, savings, and the current account in the UC and the ROW. You might want to accompany your explanation with one or more graphs.

Reference no: EM131107461

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