Dynamic effects of credit shocks in a data-rich environment

Jean Boivin (), Marc Giannoni and Dalibor Stevanovic

No 615, Staff Reports from Federal Reserve Bank of New York

Abstract: We examine the dynamic effects of credit shocks using a large data set of U.S. economic and financial indicators in a structural factor model. An identified credit shock resulting in an unanticipated increase in credit spreads causes a large and persistent downturn in indicators of real economic activity, labor market conditions, expectations of future economic conditions, a gradual decline in aggregate price indices, and a decrease in short- and longer-term riskless interest rates. Our identification procedure, which imposes restrictions on the response of a small number of economic indicators, yields interpretable estimated factors, and allows us to perform counterfactual experiments. Such an experiment suggests that credit spread shocks have largely contributed to the deterioration in economic conditions during the Great Recession.

Keywords: credit shocks; FAVAR; structural factor analysis (search for similar items in EconPapers)
JEL-codes: C32 C55 E32 E44 (search for similar items in EconPapers)
Date: 2013
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Citations: View citations in EconPapers (11)

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Related works:
Journal Article: Dynamic Effects of Credit Shocks in a Data-Rich Environment (2020)
Working Paper: Dynamic Effects of Credit Shocks in a Data-Rich Environment (2016)
Working Paper: Dynamic Effects of Credit Shocks in a Data-Rich Environment (2013)
Working Paper: Dynamic Effects of Credit Shocks in a Data-Rich Environment (2013)
Working Paper: Dynamic Effects of Credit Shocks in a Data-Rich Environment (2013)
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