Görtz, Christoph Tsoukalas, John Zanetti, Francesco
Year of Publication:
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2017: Alternative Geld- und Finanzarchitekturen - Session: Financial Frictions D06-V1
We examine the dynamic effects and empirical role of TFP news shocks in the context of frictions in financial markets. We document two new facts using VAR methods which provide robust evidence on the importance credit spreads for the propagation of news shocks. A DSGE model with financial frictions shows these are critical for the amplification of TFP news shocks. The very similar quantitative dynamics implied by VAR and DSGE methodologies provides support for the `news view' of business cycles.