Macro-financial linkages: the role of liquidity dependence

Alexey Ponomarenko, Anna Rozhkova () and Sergei Seleznev
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Anna Rozhkova: Bank of Russia, Russian Federation

No wps24, Bank of Russia Working Paper Series from Bank of Russia

Abstract: We estimate a panel Bayesian vector autoregression model for a cross-section of seven advanced European economies and produce out-of-sample forecasts of GDP conditionally on observed developments of interest rates and credit. We show that by using a smooth transition version of the model and allowing the parameters to vary across economies conditionally on their liquidity dependence, it is possible to improve the accuracy of the forecasts. We conclude that the degree of liquidity dependence is likely to be among the important predictors of heterogeneity in macro-financial linkages across countries.

Keywords: liquidity dependence; macro-financial linkages; Smooth Transition Bayesian VAR (search for similar items in EconPapers)
JEL-codes: C32 G2 O16 (search for similar items in EconPapers)
Pages: 29 pages
Date: 2017-12
New Economics Papers: this item is included in nep-mac
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Citations: View citations in EconPapers (2)

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Working Paper: Macro-financial linkages: the role of liquidity dependence (2018)
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