Credit Spread, Financial Market and Real Activities under Financial Instability: Empirical Evidence with MS-SBVAR

Satoshi Tezuka and Yoichi Matsubayashi
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Satoshi Tezuka: Graduate School of Economics, Kobe University
Yoichi Matsubayashi: Graduate School of Economics, Kobe University

No 1812, Discussion Papers from Graduate School of Economics, Kobe University

Abstract: The purpose of the paper is to show how widening credit spreads in "unstable periods" influence the primary markets, the lending markets, and production activities, in comparison with stable periods. The MS-SBVAR identifies the 2008 global financial crisis and the 2011 great East Japan earthquake as unstable periods. During unstable periods, negative shocks influence industrial activities and bond issuance, while outstanding loans are affected by positive shocks, which results from the banks in Japan remaining their financial health. In addition, marginal research is conducted, using a "modified credit spread," which eases the excess impact of the great East Japan earthquake on credit spreads. It is confirmed that the results are constant, although the regime of the disturbance terms corresponds to other events.

Pages: 27 pages
Date: 2018-03
New Economics Papers: this item is included in nep-ban
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