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Financial Stability, Monetary Stability and Growth: a PVAR Analysis

Author

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  • George Apostolakis

    (University of Crete
    Nyenrode Business Universiteit)

  • Athanasios P. Papadopoulos

    (University of Crete)

Abstract

This paper employs a panel vector autoregressive (PVAR) model to investigate the relationship among financial stress, inflation and growth in 19 advanced economies over the 1999–2016 period. To measure financial stress, we construct a financial stress index (FSI) that provides a signal of financial stress. We apply the PVAR approach along with impulse response functions (IRFs), variance decomposition, and Granger causality tests to FSI data on monetary stability, economic growth, housing markets and government policies. The analysis shows negative responses of the macroeconomic variables to financial stress shocks.

Suggested Citation

  • George Apostolakis & Athanasios P. Papadopoulos, 2019. "Financial Stability, Monetary Stability and Growth: a PVAR Analysis," Open Economies Review, Springer, vol. 30(1), pages 157-178, February.
    • Handle: RePEc:kap:openec:v:30:y:2019:i:1:d:10.1007_s11079-018-9507-y
    DOI: 10.1007/s11079-018-9507-y
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    Cited by:

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    5. Gadiy, L. & Dzhaokhadze, E. & Kiyutsevskaya, A. & Chembulatova, M., 2020. "Price and financial stability: Is there a contradiction between these goals of the Bank of Russia?," Journal of the New Economic Association, New Economic Association, vol. 47(3), pages 67-83.
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    More about this item

    Keywords

    Impulse responses; Granger causality; Government deficit; Housing prices; Financial stress index;
    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
    • C43 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods: Special Topics - - - Index Numbers and Aggregation
    • F30 - International Economics - - International Finance - - - General
    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets

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