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News and Financial Intermediation in Aggregate and Sectoral Fluctuations

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Listed author(s):
  • Görtz, Christoph
  • Tsoukalas, John D.

Abstract

We estimate a two-sector DSGE model with financial intermediaries—a-la Gertler and Karadi (2011) and Gertler and Kiyotaki (2010)—and quantify the importance of news shocks in accounting for aggregate and sectoral fluctuations. Our results indicate a significant role of financial market news as a predictive force behind fluctuations. Specifically, news about the value of assets held by financial intermediaries, reflected one to two years in advance in corporate bond markets, generate countercyclical corporate bond spreads, affect the supply of credit, and are estimated to be a significant source of aggregate fluctuations, accounting for approximately 31% of output, 22% of investment and 31% of hours worked variation in cyclical frequencies. Importantly, asset value news shocks generate both aggregate and sectoral co-movement with a standard preference specification. Financial intermediation is key for the importance and propagation of asset value news shocks.

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Paper provided by CEPREMAP in its series Dynare Working Papers with number 12.

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Length: 88 pages
Date of creation: Sep 2012
Handle: RePEc:cpm:dynare:012
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Keywords: news; financial intermediation; business cycles; DSGE; Bayesian estimation;

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Find related papers by JEL classification:
  • E2 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment
  • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles

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As found by EconAcademics.org, the blog aggregator for Economics research:
  1. News and Financial Intermediation in Aggregate and Sectoral Fluctuations
    by Christian Zimmermann in NEP-DGE blog on 2013-01-25 05:02:16
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Cited by:

  1. Christopher M. Gunn, 2014. "Overaccumulation, Interest, and Prices," Carleton Economic Papers 14-07, Carleton University, Department of Economics.
  2. repec:eee:dyncon:v:78:y:2017:i:c:p:164-189 is not listed on IDEAS
  3. Paolo Gelain & Pelin Ilbas, 2014. "Monetary and macroprudential policies in an estimated model with financial intermediation," Working Paper Research 258, National Bank of Belgium.

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