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Identification of Financial Factors in Economic Fluctuations

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  • Francesco Furlanetto
  • Francesco Ravazzolo
  • Samad Sarferaz

Abstract

We estimate demand, supply, monetary, investment and financial shocks in a VAR identified with a minimum set of sign restrictions on US data. We find that financial shocks are major drivers of fluctuations in output, stock prices and investment but have a limited effect on inflation. In a second step, we disentangle shocks originating in the housing sector, shocks originating in credit markets and uncertainty shocks. In the extended set‐up, financial shocks are even more important and a leading role is played by housing shocks that have large and persistent effects on output.

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  • Francesco Furlanetto & Francesco Ravazzolo & Samad Sarferaz, 2019. "Identification of Financial Factors in Economic Fluctuations," The Economic Journal, Royal Economic Society, vol. 129(617), pages 311-337.
    • Handle: RePEc:oup:econjl:v:129:y:2019:i:617:p:311-337.
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    File URL: http://hdl.handle.net/10.1111/ecoj.12520
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    More about this item

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • 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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