News Shocks under Financial Frictions

descriptionPublicationkeyboard_double_arrow_right Article , Other literature type , Research , Conference object 01 Jan 2020 United Kingdom, Germany English Publisher:American Economic AssociationJournal:American Economic Journal: Macroeconomics, volume 14, pages 210-243 (issn: 1945-7707, eissn: 1945-7715,

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Authors: Görtz, Christoph; Tsoukalas, John D.; Zanetti, Francesco;

doi: 10.1257/mac.20170066 , 10.2139/ssrn.3723089 , 10.2139/ssrn.3744591

handle: 10419/168066 , 10419/229546

News Shocks under Financial Frictions

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Abstract

We examine the dynamic effects of TFP news shocks in the context of frictions in financial markets. We document two new facts. First, a shock to future TFP generates a significant decline in credit spread indicators along with a robust improvement in credit supply indicators. Second, we establish a tight link between TFP news shocks and shocks that explain the majority of un-forecastable movements in credit spread indicators. A DSGE model enriched with a financial sector of the Gertler-Kiyotaki-Karadi type generates very similar quantitative dynamics. (JEL E12, E31, E32, E44, G12, G21)

Countries

United Kingdom, Germany

Related Organizations

University of Alabama at Birmingham
United States
University of Birmingham
University of Glasgow
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University of Oxford
University of Birmingham
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Keywords

E3, business cycles, E2, DSGE, ddc:330, news shocks, VAR, Bayesian estimation, E30, E20

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