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Nonlinear transmission of financial shocks: Some new evidence

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  • Mario Forni
  • Luca Gambetti
  • Nicolò Maffei-Faccioli
  • Luca Sala

Abstract

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 the 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.

Suggested Citation

  • Mario Forni & Luca Gambetti & Nicolò Maffei-Faccioli & Luca Sala, 2022. "Nonlinear transmission of financial shocks: Some new evidence," Working Paper 2022/3, Norges Bank.
    • Handle: RePEc:bno:worpap:2022_3
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    File URL: https://hdl.handle.net/11250/2997495
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    Cited by:

    1. Giovanni Ballarin, 2023. "Impulse Response Analysis of Structural Nonlinear Time Series Models," Papers 2305.19089, arXiv.org, revised Aug 2023.

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    More about this item

    Keywords

    SVAR; Financial shocks; Non-linearity; Asymmetry; Financial crisis;
    All these keywords.

    JEL classification:

    • C32 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes; State Space Models
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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