Nonlinear Transmission of Financial Shocks: Some New Evidence

Financial shocks generate a protracted and quantitatively important effect on real economic activity and financial markets only if the shocks are both negative and large. Otherwise, their role is quite modest. Financial shocks have become more important for economic fluctuations after 2000 and have...

Full description

Saved in:
Bibliographic Details
Published inJournal of money, credit and banking Vol. 56; no. 1; pp. 5 - 33
Main Authors FORNI, MARIO, GAMBETTI, LUCA, MAFFEI‐FACCIOLI, NICOLÒ, SALA, LUCA
Format Journal Article
LanguageEnglish
Published Columbus Ohio State University Press 01.02.2024
Subjects
asymmetry
Economic activity
Economic fluctuations
financial crisis
financial shocks
Nonlinear analysis
nonlinearity
SVAR
Online AccessGet full text

Cover

More Information
Summary:Financial shocks generate a protracted and quantitatively important effect on real economic activity and financial markets only if the shocks are both negative and large. Otherwise, their role is quite modest. Financial shocks have become more important for economic fluctuations after 2000 and have contributed substantially to deepening the recessions of 2001 and 2008. The evidence is obtained using a new econometric procedure based on a Vector Moving Average representation that includes a nonlinear function of the financial shock. This method is a contribution of the present work.
ISSN:0022-2879
1538-4616
DOI:10.1111/jmcb.13099