Commonalities and cross-country spillovers in macroeconomic-financial linkages

Matteo Ciccarelli, Eva Ortega and Maria Valderrama ()

The B.E. Journal of Macroeconomics, 2016, vol. 16, issue 1, 231-275

Abstract: In this paper, we investigate commonalities and spillovers in macro-financial linkages across developed economies. A Bayesian panel vector autoregression (VAR) model with real and financial variables identifies significant common components, especially during the Great Recession. Nevertheless, country-specific factors remain important, which is consistent with the heterogeneous behavior observed across countries over time. We also find that spillovers across countries and between real and financial variables are key to explain economic fluctuations. A shock to a variable in a given country affects all other countries, and the transmission seems to be faster and deeper between financial variables than between real variables. For a shock to a financial variable to have a noticeable effect on the real economy elsewhere, it needs to be either common to all countries or to have originated in a systemic country.

Keywords: financial crisis; macro-financial linkages; panel VAR models (search for similar items in EconPapers)
JEL-codes: C11 C33 E32 F44 (search for similar items in EconPapers)
Date: 2016
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Citations: View citations in EconPapers (13)

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DOI: 10.1515/bejm-2013-0120

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