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Financial Shocks, Uncertainty Shocks, and Corporate Liquidity

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  • Marco Brianti

Abstract

I estimate a structural VAR identified using sign restrictions to separately identify financial, macro uncertainty, and financial uncertainty shocks. The novelty of the estimation procedure relies on the qualitatively different response of corporate liquidity: Financial shocks lead firms to draw down their liquidity as they lose access to external finance, while uncertainty‐type shocks drive‐up liquid assets as a precautionary measure. While all three shocks have contractionary effects on the US economy, only macro uncertainty shocks trigger deflationary patterns. Existing theoretical frameworks can rationalize this finding.

Suggested Citation

  • Marco Brianti, 2025. "Financial Shocks, Uncertainty Shocks, and Corporate Liquidity," Journal of Applied Econometrics, John Wiley & Sons, Ltd., vol. 40(7), pages 814-828, November.
    • Handle: RePEc:wly:japmet:v:40:y:2025:i:7:p:814-828
    DOI: 10.1002/jae.70006
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    Cited by:

    1. Beckmann, Joscha & Czudaj, Robert L., 2026. "Uncertainty shocks and inflation: The role of credibility and expectation anchoring," Journal of International Money and Finance, Elsevier, vol. 160(C).
    2. Matthew Read, 2026. "Shock-percentile Restrictions for SVARs," RBA Research Discussion Papers rdp2026-01, Reserve Bank of Australia.

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