Financial Frictions in Data Evidence and Impact
This paper investigates financial frictions in US postwar data to understand the interaction between the real business cycle and the credit market. A Bayesian estimation technique is used to estimate a large Vector Autoregression and New Keynesian models demonstrating how financial shocks can have a...
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Format: | eBook |
Language: | English |
Published: |
Washington, D.C.
International Monetary Fund
2014
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Series: | IMF Working Papers
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Collection: | International Monetary Fund - Collection details see MPG.ReNa |
Summary: | This paper investigates financial frictions in US postwar data to understand the interaction between the real business cycle and the credit market. A Bayesian estimation technique is used to estimate a large Vector Autoregression and New Keynesian models demonstrating how financial shocks can have a large and sluggish impact on the economy. I identify the default risk and the maturity mismatch channels of monetary policy transmission; I further employ a generalized-IRF to establish countercyclicality of risk spreads; and I show that the maturity mismatch shocks produce a stronger impact than the default risk shocks |
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Physical Description: | 33 pages |
ISBN: | 9781484336557 |