Financial Intermediaries and the Macroeconomy: Evidence from a High-Frequency Identification

Pablo Ottonello and Wenting Song

No 29638, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We provide empirical evidence of the causal effects of changes in financial intermediaries' net worth in the aggregate economy. Our strategy identifies financial shocks as high-frequency changes in the market value of intermediaries' net worth in a narrow window around their earnings announcements, based on U.S. tick-by-tick data. Using these shocks, we estimate that news of a 1-percent decline in intermediaries' net worth leads to a 0.2-0.4 percent decrease in the market value of nonfinancial firms. These effects are more pronounced for firms with high default risk and low liquidity and when the aggregate net worth of intermediaries is low.

JEL-codes: E30 E5 G01 G2 (search for similar items in EconPapers)
Date: 2022-01
New Economics Papers: this item is included in nep-ban, nep-fdg, nep-ifn, nep-mac and nep-mst
Note: AP CF EFG IFM ME
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Working Paper: Financial Intermediaries and the Macroeconomy: Evidence from a High-Frequency Identification (2022)
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