News and financial intermediation in aggregate and sectoral fluctuations

Christoph Görtz and John Tsoukalas

MPRA Paper from University Library of Munich, Germany

Abstract: We estimate a two-sector DSGEmodel with financial intermediaries—a-la Gertler and Karadi (2011) and Gertler and Kiyotaki (2010)—and quantify the importance of news shocks in accounting for aggregate and sectoral fluctuations. Our results indicate a significant role of financial market news as a predictive force behind fluctuations. Specifically, news about the value of assets held by financial intermediaries, reflected one to two years in advance in corporate bond markets, generate countercyclical corporate bond spreads, affect the supply of credit, and are estimated to be a significant source of aggregate fluctuations, accounting for approximately 31% of output, 22% of investment and 31% of hours worked variation in cyclical frequencies. Importantly, asset value news shocks generate both aggregate and sectoral co-movement with a standard preference specification. Financial intermediation is key for the importance and propagation of asset value news shocks.

Keywords: News; Financial intermediation; Business cycles; DSGE; Bayesian estimation (search for similar items in EconPapers)
JEL-codes: E2 E3 (search for similar items in EconPapers)
Date: 2011-03, Revised 2012-07
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Citations: View citations in EconPapers (4)

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https://mpra.ub.uni-muenchen.de/40442/1/MPRA_paper_40442.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/40442/2/Gortz_Tsoukalas_GTbanks4v7_July.pdf original version (application/pdf)

Related works:
Working Paper: News and Financial Intermediation in Aggregate and Sectoral Fluctuations (2012)
Working Paper: News and Financial Intermediation in Aggregate and Sectoral Fluctuations (2012)
Working Paper: News and financial intermediation in aggregate and sectoral fluctuations (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:40442

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