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Identification of financial factors in economic fluctuations

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We estimate demand, supply, monetary, investment and nancial shocks in a VAR identified with a minimum set of sign restrictions on US data. We find that financial shocks are major drivers of fluctuations in output, stock prices and investment but have a limited effect on inflation. In a second step we disentangle shocks originating in the housing sector, shocks originating in credit markets and uncertainty shocks. In the extended set-upfinancial shocks are even more important and a leading role is played by housing shocks that have large and persistent effects on output.

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File URL: http://dx.doi.org/10.3929/ethz-a-010200285
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Paper provided by KOF Swiss Economic Institute, ETH Zurich in its series KOF Working papers with number 14-364.

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Length: 55 pages
Date of creation: Jan 2014
Handle: RePEc:kof:wpskof:14-364
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