Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/234752
Authors: 
Boivin, Jean
Giannoni, Marc P.
Stevanovic, Dalibor
Year of Publication: 
2017
Series/Report no.: 
Document de travail No. 2017-07
Abstract: 
We examine the dynamic effects of credit shocks using a large data set of U.S. economic and financial indicators in a structural factor model. An identified credit shock resulting in an unanticipated increase in credit spreads causes a large and persistent downturn in indicators of real economic activity, labor market conditions, expectations of future economic conditions, a gradual decline in aggregate price indices, and a decrease in short- and longer-term riskless interest rates. Our identification procedure allows us to perform counterfactual experiments which suggest that credit spread shocks have largely contributed to the deterioration in economic conditions during the Great Recession. Recursive estimation of the model reveals relevant instabilities since 2007 and provides further evidence that monetary policy has partly offset the effects of credit shocks on economic activity.
Subjects: 
Credit shocks
FAVAR
structural factor analysis.
JEL: 
C55
C32
E32
E44
Document Type: 
Working Paper

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