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Financial Risk and Real Variables: Evidence Based on a SVAR Analysis of the Czech Economy

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  • Vít Pošta
  • Zdeněk Pikhart

Abstract

Recent financial crisis has brought to attention the issues of interactions between fi nancial markets and real economy. This paper presents an analysis of the possible explicit effects of various measures of financial markets’ risk on real economy based on impulse - response functionswithin structural vector autoregressive models. As discussed in the paper the riskiness of financial markets is closely related to the more traditional mechanisms based on fi nancial akcelerátor approach, however, although the issue of fi nancial risk is closely tied with the fi nancial akcelerátor model, broader effects outside this model may be considered as well. The analysis is carried out for the Czech Republic. The estimates of the responses in the impulse-response analyses typically correspond with the hypothesized effects of the financial risk factors on the real variables; also the interrelations between some of the fi nancial risk factors are obvious. We conclude that increased financial risk seems to be an amplifying element rather than the key driver in the interactions between financial and real economy.

Suggested Citation

  • Vít Pošta & Zdeněk Pikhart, 2015. "Financial Risk and Real Variables: Evidence Based on a SVAR Analysis of the Czech Economy," Prague Economic Papers, University of Economics, Prague, vol. 2015(5), pages 516-537.
  • Handle: RePEc:prg:jnlpep:v:2015:y:2015:i:5:id:513:p:516-537
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    References listed on IDEAS

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    More about this item

    Keywords

    SVAR; financial markets’ risk; financial crisis; financial accelerator; Czech economy; business fluctuations;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • G01 - Financial Economics - - General - - - Financial Crises

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