Dynamic Interactions Between Financial and Macroeconomic Imbalances: A Panel VAR Analysis

Amat Adarov

No 162, wiiw Working Papers from The Vienna Institute for International Economic Studies, wiiw

Abstract: We use Bayesian and GMM panel VAR frameworks to study interactions between financial cycles and macroeconomic imbalances based on a global sample of 24 countries spanning the period 1998‑2012. We find that financial cycles play an important role in shaping macroeconomic imbalances with expansions inducing economic overheating and a downward pressure on public debt-to-GDP ratios, and vice versa. Bank-based economies exhibit a deeper and faster response of business cycles to financial misalignments, while the impact in market-based economies is milder, but more persistent, as well as more significant for current account and public debt dynamics. Financial cycles invoke a particularly strong reaction of current account balances and especially public debt ratios in the euro area.

Keywords: financial cycles; macroeconomic imbalances; financial stability; business cycles; panel VAR; Bayesian VAR (search for similar items in EconPapers)
JEL-codes: E44 F32 F4 G15 (search for similar items in EconPapers)
Pages: 32 pages including 7 Tables and 12 Figures
Date: 2019-02
New Economics Papers: this item is included in nep-mac, nep-mon and nep-opm
References: View references in EconPapers View complete reference list from CitEc
Citations:

Published as wiiw Working Paper

Downloads: (external link)
https://wiiw.ac.at/dynamic-interactions-between-fi ... nalysis-dlp-4800.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:wii:wpaper:162

Ordering information: This working paper can be ordered from
https://wiiw.ac.at

Access Statistics for this paper

More papers in wiiw Working Papers from The Vienna Institute for International Economic Studies, wiiw Contact information at EDIRC.
Bibliographic data for series maintained by Customer service ().