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Financial Regulation Policy Uncertainty and Credit Spreads in the U.S

Listed author(s):
  • Gabriela Nodari

    ()

    (University of Verona)

This paper quantifies the macroeconomic effects of surprise movements in uncertainty about financial regulation policies in the U.S. economy. Within the context of a Structural VAR model, exogenous variations in financial regulation policy uncertainty lead to a widening in corporate credit spreads, and can potentially trigger flight to quality and flight to liquidity episodes. Financial regulation policy uncertainty shocks also induce a strong and persistent reduction of industrial production, an increase in unemployment and a deflationary phase, acting as negative demand shocks. A variance decomposition analysis underlines the contribution of the shock for the dynamics of the macro observables. These findings are supported by a variety of robustness checks.

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File URL: http://economia.unipd.it/sites/decon.unipd.it/files/20130170.pdf
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Paper provided by Dipartimento di Scienze Economiche "Marco Fanno" in its series "Marco Fanno" Working Papers with number 0170.

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Length: 21 pages
Date of creation: Aug 2013
Handle: RePEc:pad:wpaper:0170
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