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Hubrich, Kirstin
D’Agostino, Antonello
Cervená, Marianna
Ciccarelli, Matteo
Guarda, Paolo
Haavio, Markus
Jeanfils, Philippe
Mendicino, Caterina
Ortega, Eva
Valderrama, Maria Teresa
Valentinyiné Endrész, Marianna
Year of Publication: 
Series/Report no.: 
ECB Occasional Paper 143
This paper analyses the transmission of financial shocks to the macroeconomy. The role of macro-financial linkages is investigated from an empirical perspective for the euro area as a whole, for individual euro area member countries and for other EU and OECD countries. The following key economic questions are addressed: 1) Which financial shocks have the largest impact on output over the full sample on average? 2) Are financial developments leading real activity? 3) Is there heterogeneity or a common pattern in macro-financial linkages across the euro area and do these linkages vary over time? 4) Do cross-country spillovers matter? 5) Is the transmission of financial shocks different during episodes of high stress than it is in normal times, i.e. is there evidence of non-linearities? In summary, it is found that real asset prices are significant leading indicators of real activity whereas the latter leads loan developments. Furthermore, evidence is presented that macro-financial linkages are heterogeneous across countries – despite persistent commonalities – and time-varying. Moreover, they differ between euro area and other countries. Results also indicate that cross-country spillovers matter. Finally, important non-linearities in the transmission of financial shocks are documented, as the evidence suggests that the transmission differs in episodes of high stress compared with normal times.
Financial shocks
lead-lag relationships
macro-financial linkages
Document Type: 
Research Report
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