Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153955
Authors: 
Fornari, Fabio
Stracca, Livio
Year of Publication: 
2013
Series/Report no.: 
ECB Working Paper 1522
Abstract: 
In this paper we attempt to evaluate the quantitative impact of financial shocks on key indicators of real activity and financial conditions. We focus on financial shocks as they have received wide attention in the recent literature and in the policy debate after the global financial crisis. We estimate a panel VAR for 21 advanced economies based on quarterly data between 1985 and 2011, where financial shocks are identified through sign restrictions. Overall, we find robust evidence that financial shocks can be separately identified from other shock types and that they exert a significant influence on key macroeconomic variables such as GDP and (particularly) investment, but it is unclear whether these shocks are demand or supply shocks from the standpoint of their macroeconomic impact. The financial development and the financial structure of a given country are found not to matter much for the intensity of the propagation of financial shocks. Moreover, we generally find that these shocks play a role not only in crisis times, but also in normal conditions. Finally, we discuss the implications of our findings for monetary policy.
Subjects: 
credit
Financial shocks
Identification
leverage
stochastic pooling
VAR
JEL: 
E44
E52
E58
G20
Document Type: 
Working Paper

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