Financial Acceleration of Booms and Busts
AbstractFor a panel of 20 industrialized countries from 1970 through 2002,we analyze the role of financial variables in economic cycles. We focus on equity busts, which are considered a proxy for downward revisions of economic prospects. Our empirical findings provide support for financial accelerator effects around asset price busts. The financial accelerator mechanism appears to have become stronger over time. The typical bust is followed by a reduction in nominal policy interest rates, sometimes to levels close to the zero lower bound.
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Bibliographic InfoPaper provided by Netherlands Central Bank, Research Department in its series DNB Working Papers with number 035.
Date of creation: Apr 2005
Date of revision:
asset price busts; financial accelerator;
Find related papers by JEL classification:
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
This paper has been announced in the following NEP Reports:
- NEP-ALL-2005-05-07 (All new papers)
- NEP-BEC-2005-05-07 (Business Economics)
- NEP-MAC-2005-05-07 (Macroeconomics)
- NEP-MON-2005-05-07 (Monetary Economics)
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