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Heterogeneity and cross-country spillovers in macroeconomic-financial linkages

  • Ciccarelli, Matteo
  • Ortega, Eva
  • Valderrama, Maria Teresa

We investigate heterogeneity and spillovers in macro-financial linkages across developed economies, with a particular emphasis in the most recent recession. A panel Bayesian VAR model including real and financial variables identifies a statistically significant common component, which turns out to be very significant during the most recent recession. Nevertheless, countryspecific factors remain important, which explains the heterogeneous behaviour across countries observed over time. Moreover, spillovers across countries and between real and financial variables are found to matter: A shock to a variable in a given country affects all other countries, and the transmission seems to be faster and deeper between financial variables than between real variables. Finally, shocks spill over in a heterogeneous way across countries. JEL Classification: C11, C33, E32, F44

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Paper provided by European Central Bank in its series Working Paper Series with number 1498.

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Date of creation: Nov 2012
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Handle: RePEc:ecb:ecbwps:20121498
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  1. Fabio Canova & Matteo Ciccarelli & Eva Ortega, 2009. "Do institutional changes affect business cycles? Evidence from Europe," Working Papers 0921, Banco de España;Working Papers Homepage.
  2. Domenico Giannone & Michèle Lenza & Lucrezia Reichlin, 2012. "Money, Credit, Monetary Policy and the Business Cycle in the Euro Area," Working Papers ECARES ECARES 2012-008, ULB -- Universite Libre de Bruxelles.
  3. Pesaran, M. H. & Shin, Y., 1997. "Generalised Impulse Response Analysis in Linear Multivariate Models," Cambridge Working Papers in Economics 9710, Faculty of Economics, University of Cambridge.
  4. Hideaki Hirata & Ayhan Kose & Christopher Otrok, 2013. "Regionalization vs. Globalization," IMF Working Papers 13/19, International Monetary Fund.
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  7. Canova, Fabio & Ciccarelli, Matteo, 2006. "Estimating multi-country VAR models," Working Paper Series 0603, European Central Bank.
  8. Canova, Fabio & Ciccarelli, Matteo, 2012. "ClubMed? Cyclical fluctuations in the Mediterranean basin," Journal of International Economics, Elsevier, vol. 88(1), pages 162-175.
  9. Michael Biggs & Thomas Mayer & Andreas Pick, 2009. "Credit and economic recovery," DNB Working Papers 218, Netherlands Central Bank, Research Department.
  10. Chib, Siddhartha & Greenberg, Edward, 1995. "Hierarchical analysis of SUR models with extensions to correlated serial errors and time-varying parameter models," Journal of Econometrics, Elsevier, vol. 68(2), pages 339-360, August.
  11. Ciccarelli, Matteo & Peydró, José-Luis & Maddaloni, Angela, 2010. "Trusting the bankers: a new look at the credit channel of monetary policy," Working Paper Series 1228, European Central Bank.
  12. Sargent, Thomas J, 1989. "Two Models of Measurements and the Investment Accelerator," Journal of Political Economy, University of Chicago Press, vol. 97(2), pages 251-87, April.
  13. Canova, Fabio & Ciccarelli, Matteo & Ortega, Eva, 2004. "Similarities and convergence in G-7 cycles," Working Paper Series 0312, European Central Bank.
  14. Kadiyala, K. Rao & Karlsson, Sune, 1994. "Numerical Aspects of Bayesian VAR-modeling," SSE/EFI Working Paper Series in Economics and Finance 12, Stockholm School of Economics.
  15. Lane, Philip R. & Milesi-Ferretti, Gian Maria, 2006. "The External Wealth of Nations Mark II: Revised and Extended Estimates of Foreign Assets and Liabilities, 1970-2004," CEPR Discussion Papers 5644, C.E.P.R. Discussion Papers.
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