News Shocks under Financial Frictions
Christoph Görtz,
John Tsoukalas and
Francesco Zanetti
Working Papers from Business School - Economics, University of Glasgow
Abstract:
This paper examines the dynamic effects and empirical role of aggregate and sectoral TFP news shocks in the context of frictions in financial markets. Financial frictions result in credit spreads that contain important information about expectations of future economic activity. A TFP news shock identified from the VAR model generates a significant decline in the corporate bond spread and a broad based expansion in activity in anticipation of a future TFP improvement. A DSGE model enriched with a financial sector of the Gertler-Kiyotaki type generates very similar quantitative dynamics and shows that strong linkages between leveraged equity and capital prices are critical for the amplification of TFP news shocks. The consistent assessment from both methodologies provides support for the traditional `news view' of aggregate fluctuations. The analysis sheds light on important differences in the propagation of sectoral TFP news shocks.
Keywords: News shocks; Business cycles; DSGE; VAR; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E2 E3 (search for similar items in EconPapers)
Date: 2016-06
New Economics Papers: this item is included in nep-dge and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (30)
Downloads: (external link)
http://www.gla.ac.uk/media/media_476558_en.pdf (application/pdf)
Related works:
Journal Article: News Shocks under Financial Frictions (2022) 
Working Paper: News Shocks under Financial Frictions (2021) 
Working Paper: News Shocks under Financial Frictions (2020) 
Working Paper: News Shocks under Financial Frictions (2020) 
Working Paper: News shocks under financial frictions (2020) 
Working Paper: News Shocks under Financial Frictions (2017) 
Working Paper: News Shocks under Financial Frictions (2016) 
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
HTML/Text
Persistent link: https://EconPapers.repec.org/RePEc:gla:glaewp:2016_15
Access Statistics for this paper
More papers in Working Papers from Business School - Economics, University of Glasgow Contact information at EDIRC.
Bibliographic data for series maintained by Business School Research Team ().