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Financial shocks and the real economy in a nonlinear world: a survey of the theoretical and empirical literature

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  • Andrea Silvestrini

    () (Bank of Italy)

  • Andrea Zaghini

    () (Bank of Italy)

Abstract

In this paper we present an overview of theoretical and empirical contributions exploring the inter-linkages between financial factors and real economic activity. We first revisit the main theoretical approaches that allow financial frictions to be embedded into general equilibrium models, and then we survey, from an empirical perspective, the most recent papers focusing on macro-financial linkages, with a particular emphasis on works dealing with parameter time variation and other types of nonlinearities. We conclude by discussing some policy implications and suggesting directions for future research.

Suggested Citation

  • Andrea Silvestrini & Andrea Zaghini, 2015. "Financial shocks and the real economy in a nonlinear world: a survey of the theoretical and empirical literature," Questioni di Economia e Finanza (Occasional Papers) 255, Bank of Italy, Economic Research and International Relations Area.
  • Handle: RePEc:bdi:opques:qef_255_15
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    File URL: http://www.bancaditalia.it/pubblicazioni/qef/2015-0255/QEF_255.pdf
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    References listed on IDEAS

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    Cited by:

    1. Silvestrini, Andrea & Zaghini, Andrea, 2015. "Financial shocks and the real economy in a nonlinear world: From theory to estimation," Journal of Policy Modeling, Elsevier, pages 915-929.
    2. Boris Blagov & Michael Funke & Richhild Moessner, 2015. "Modelling the time-variation in euro area lending spreads," BIS Working Papers 526, Bank for International Settlements.
    3. Antonio M. Conti & Stefano Neri & Andrea Nobili, 2015. "Why is inflation so low in the euro area?," Temi di discussione (Economic working papers) 1019, Bank of Italy, Economic Research and International Relations Area.

    More about this item

    Keywords

    financial shocks; credit; financial crisis; nonlinearity;

    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
    • 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
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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