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Financial shocks and the macroeconomy: heterogeneity and non-linearities

Author

Listed:
  • Ciccarelli, Matteo
  • Jeanfils, Philippe
  • Haavio, Markus
  • Ĉervená, Marianna
  • Guarda, Paolo
  • Mendicino, Caterina
  • D'Agostino, Antonello
  • Valderrama, Maria Teresa
  • Ortega, Eva
  • Hubrich, Kirstin
  • Valentinyiné Endrész, Marianna

Abstract

This paper analyses the transmission of financial shocks to the macro-economy. The role of macro-financial linkages is investigated from an empirical perspective for the euro area as a whole, for individual euro area member countries and for other EU and OECD countries. The following key economic questions are addressed: 1) Which financial shocks have the largest impact on output over the full sample on average? 2) Are financial developments leading real activity? 3) Is there heterogeneity or a common pattern in macro-financial linkages across the euro area and do these linkages vary over time? 4) Do cross-country spillovers matter? 5) Is the transmission of financial shocks different during episodes of high stress than it is in normal times, i.e. is there evidence of non-linearities? In summary, it is found that real asset prices are significant leading indicators of real activity whereas the latter leads loan developments. Furthermore, evidence is presented that macro-financial linkages are heterogeneous across countries JEL Classification: C43, D11

Suggested Citation

  • Ciccarelli, Matteo & Jeanfils, Philippe & Haavio, Markus & Ĉervená, Marianna & Guarda, Paolo & Mendicino, Caterina & D'Agostino, Antonello & Valderrama, Maria Teresa & Ortega, Eva & Hubrich, Kirstin &, 2013. "Financial shocks and the macroeconomy: heterogeneity and non-linearities," Occasional Paper Series 143, European Central Bank.
    • Handle: RePEc:ecb:ecbops:2013143
    Note: 224580
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    More about this item

    Keywords

    financial shocks; heterogeneity; lead-lag relationships; macro-financial linkages;
    All these keywords.

    JEL classification:

    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • D11 - Microeconomics - - Household Behavior - - - Consumer Economics: Theory

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