Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/210778
Authors: 
Zivanovic, Jelena
Year of Publication: 
2019
Series/Report no.: 
Bank of Canada Staff Working Paper 2019-38
Abstract: 
I use a structural vector autoregression (SVAR) with sign restrictions to provide conditional evidence on the behavior of the US external finance premium (EFP). The results indicate that the excess bond premium, a proxy for the EFP, reacts countercyclically to supply and monetary policy shocks and procyclically to demand shocks. I confront my empirical evidence with the predictions from financial dynamic stochastic general equilibrium (DSGE) models with respect to the finance premium in order to identify an empirically relevant financial friction. The Bernanke, Gertler and Gilchrist (1999) model generates transmission mechanisms that are favored by the data.
Subjects: 
Financial markets
Economic models
Recent economic and financialdevelopments
JEL: 
E32
E44
Document Type: 
Working Paper

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