Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/80487
Authors: 
Hartmann, Philipp
Hubrich, Kirstin
Kremer, Manfred
Tetlow, Robert J.
Year of Publication: 
2013
Series/Report no.: 
Beiträge zur Jahrestagung des Vereins für Socialpolitik 2013: Wettbewerbspolitik und Regulierung in einer globalen Wirtschaftsordnung - Session: Financial Stability G02-V3
Abstract: 
We integrate systemic financial instability in an empirical macroeconomic model for the euro area. We find that at times of widespread financial instability the macroeconomy functions fundamentally differently from tranquil times. We employ a richly specified Markov-Switching Vectorautoregression model to capture the dynamic relationships between a set of core macroeconomic variables and a novel indicator of systemic financial stress. Both the parameters that capture the transmission of shocks through the economy and the variances of the shocks change at times of high stress in the financial system. In particular, the negative output effects of sizeable increases in financial stress are much larger after such a regime change than during tranquil times. Macroprudential and monetary policy makers are well advised to take these nonlinearities into account.
JEL: 
E44
C11
C32
Document Type: 
Conference Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.