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Identification of financial factors in economic fluctuations

Francesco Furlanetto (), Francesco Ravazzolo () and Samad Sarferaz ()

No 2014/09, Working Paper from Norges Bank

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.

Keywords: VAR; Sign restrictions; Financial shocks; External finance premium; Housing; Uncertainty (search for similar items in EconPapers)
JEL-codes: C11 C32 E32 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-cba, nep-fdg, nep-mac and nep-mon
Date: 2014-07-18
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