Financial Regulation Policy Uncertainty and Credit Spreads in the U.S

Gabriela Nodari

No 170, "Marco Fanno" Working Papers from Dipartimento di Scienze Economiche "Marco Fanno"

Abstract: This paper quantifies the macroeconomic effects of surprise movements in uncertainty about financial regulation policies in the U.S. economy. Within the context of a Structural VAR model, exogenous variations in financial regulation policy uncertainty lead to a widening in corporate credit spreads, and can potentially trigger flight to quality and flight to liquidity episodes. Financial regulation policy uncertainty shocks also induce a strong and persistent reduction of industrial production, an increase in unemployment and a deflationary phase, acting as negative demand shocks. A variance decomposition analysis underlines the contribution of the shock for the dynamics of the macro observables. These findings are supported by a variety of robustness checks.

Pages: 21 pages
Date: 2013-08
New Economics Papers: this item is included in nep-cba
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Citations: View citations in EconPapers (4)

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Journal Article: Financial regulation policy uncertainty and credit spreads in the US (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pad:wpaper:0170

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