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Financial Intermediaries and the Macroeconomy: Evidence from a High-Frequency Identification

Author

Listed:
  • Pablo Ottonello
  • Wenting Song

Abstract

We provide empirical evidence of the causal effects of changes in financial intermediaries' net worth in the aggregate economy. Our strategy identifies financial shocks as high-frequency changes in the market value of intermediaries' net worth in a narrow window around their earnings announcements, based on U.S. tick-by-tick data. Using these shocks, we estimate that news of a 1-percent decline in intermediaries' net worth leads to a 0.2-0.4 percent decrease in the market value of nonfinancial firms. These effects are more pronounced for firms with high default risk and low liquidity and when the aggregate net worth of intermediaries is low.

Suggested Citation

  • Pablo Ottonello & Wenting Song, 2022. "Financial Intermediaries and the Macroeconomy: Evidence from a High-Frequency Identification," NBER Working Papers 29638, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:29638
    Note: AP CF EFG IFM ME
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    Cited by:

    1. Rich Ryan, 2025. "Credit-Market Cyclicality and Unemployment Volatility," JRFM, MDPI, vol. 18(9), pages 1-30, August.
    2. Michael B. Devereux & Charles Engel & Steve Pak Yeung Wu, 2023. "Collateral Advantage: Exchange Rates, Capital Flows and Global Cycles," NBER Working Papers 31164, National Bureau of Economic Research, Inc.
    3. repec:rim:rimwps:23-03 is not listed on IDEAS

    More about this item

    JEL classification:

    • E30 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - General (includes Measurement and Data)
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G01 - Financial Economics - - General - - - Financial Crises
    • G2 - Financial Economics - - Financial Institutions and Services

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