Feedbacks: Financial Markets and Economic Activity
By Markus K. Brunnermeier, Darius N Palia, Karthik A. Sastry, Christopher A. Sims. The American Economic Review, 2019
110 citations recorded by the source corpus.
Is credit expansion a sign of desirable financial deepening or the prelude to an inevitable bust? We study this question in modern US data using a structural VAR model of 10 monthly frequency variables, identified by heteroskedasticity. Negative reduced-form responses of output to credit growth are caused by endogenous monetary policy response to credit expansion shocks. On average, credit and output growth remain positively associated. “Financial stress” shocks to credit spreads cause declines in output and credit levels. Neither credit aggregates nor spreads provide much advance warning of the 2008–2009 crisis, but spreads improve within-crisis forecasts. (JEL C51, E23, E31, E43, E44, E52, G01)
Subfields: Economics and Econometrics
View Paper: https://www.semanticscholar.org/paper/8b94d3120253f53b8824d99be387f5311c62ba76
How researchers see this paper
The researchers whose trusted networks rank it highest, strongest advocate first. Every researcher gets a different order.
In Economics and Econometrics
- Alan M. Taylor
- Ò. Jordà
- Sanjay R. Singh
- M. Schularick
- Giuseppe Cavaliere
- Björn Richter
- Thomas Steger
- S. Leybourne
Citations in the corpus
- The Long-Run Effects of Monetary Policy (2020, background): “Panels (a) and (b) display estimates from a large-scale Bayesian VAR with heteroskedasticity on monthly data (1973:1–2015:6) from Brunnermeier et al. (2021).”