We analyze the contribution of credit spread, house and stock price shocks to the US economy based on a time-varying parameter vector autoregressive model. We find that the contribution of financial shocks to gross domestic product growth fluctuates from about 20% in normal times to more than 50% during the Great Reces-sion. The Great Recession and the subsequent weak recovery can largely be traced back to negative housing shocks. Housing shocks have become more important for the real economy since the early 2000s, and negative housing shocks are more important than positive ones. Unexpected increases in credit spreads have not been deflationary recently
Time variation in macro-financial linkages
MARCELLINO, MASSIMILIANO
2016
Abstract
We analyze the contribution of credit spread, house and stock price shocks to the US economy based on a time-varying parameter vector autoregressive model. We find that the contribution of financial shocks to gross domestic product growth fluctuates from about 20% in normal times to more than 50% during the Great Reces-sion. The Great Recession and the subsequent weak recovery can largely be traced back to negative housing shocks. Housing shocks have become more important for the real economy since the early 2000s, and negative housing shocks are more important than positive ones. Unexpected increases in credit spreads have not been deflationary recentlyFile | Dimensione | Formato | |
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