Identification of Financial Factors in Economic Fluctuations

Francesco Furlanetto, Francesco Ravazzolo and Samad Sarferaz

The Economic Journal, 2019, vol. 129, issue 617, 311-337

Abstract: We estimate demand, supply, monetary, investment and financial shocks in a VAR identified with a minimum set of sign restrictions on US data. We find that financial shocks are major drivers of fluctuations in output, stock prices and investment but have a limited effect on inflation. In a second step, we disentangle shocks originating in the housing sector, shocks originating in credit markets and uncertainty shocks. In the extended set‐up, financial shocks are even more important and a leading role is played by housing shocks that have large and persistent effects on output.

Date: 2019
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Related works:
Working Paper: Identification of financial factors in economic fluctuations (2014)
Working Paper: Identification of financial factors in economic fluctuations (2014)
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