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Financial Frictions in Data: Evidence and Impact

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  • Marzie Taheri Sanjani

Abstract

This paper investigates financial frictions in US postwar data to understand the interaction between the real business cycle and the credit market. A Bayesian estimation technique is used to estimate a large Vector Autoregression and New Keynesian models demonstrating how financial shocks can have a large and sluggish impact on the economy. I identify the default risk and the maturity mismatch channels of monetary policy transmission; I further employ a generalized-IRF to establish countercyclicality of risk spreads; and I show that the maturity mismatch shocks produce a stronger impact than the default risk shocks.

Suggested Citation

  • Marzie Taheri Sanjani, 2014. "Financial Frictions in Data: Evidence and Impact," IMF Working Papers 2014/238, International Monetary Fund.
    • Handle: RePEc:imf:imfwpa:2014/238
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    Cited by:

    1. Donal Smith, 2016. "The International Impact of Financial Shocks: A Global VAR and Connectedness Measures Approach," Discussion Papers 16/07, Department of Economics, University of York.

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