Macroeconomic Effects of Financial Shocks: Comment

Johannes Pfeifer

No 50, Dynare Working Papers from CEPREMAP

Abstract: Urban Jermann and Vincenzo Quadrini (2012) argue that financial shocks are the most important factor driving U.S. business cycles. I show that the construction of their TFP measure suffers from data problems. A corrected TFP measure is able to account for most of the Great Recession. Their estimated DSGE model is also affected by several issues. In a properly reestimated model, marginal efficiency of investment shocks explain most of output volatility, while the contribution of financial shocks is 6.5 percent as opposed to the 46 percent originally reported. Still, financial shocks contribute 2-3 percentage points to the observed GDP drop during the Great Recession.

Keywords: Financial Frictions; Pecking Order; Marginal Efficiency of Investment (search for similar items in EconPapers)
JEL-codes: E23 E32 E44 G01 G32 (search for similar items in EconPapers)
Pages: 19 pages
Date: 2016-07
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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