Financial innovation, macroeconomic volatility and the great moderation

Andrea Zaghini and Lorenzo Bencivelli

MPRA Paper from University Library of Munich, Germany

Abstract: In the paper we propose an assessment of the role of financial innovation in shaping US macroeconomic dynamics. We extend an existing model by Christiano, Eichenbaum and Evans which studied the transmission of monetary policy impulses to business and corporate sector financing variables just before the Great Moderation period. By investigating the properties of the model over a longer time span we show that in the later period a change in the monetary policy transmission mechanism is likely to have occurred. In particular, we argue that the role of financial innovation has significantly altered the transmission of shocks

Keywords: Great Moderation; Monetary policy; Financial Innovation (search for similar items in EconPapers)
JEL-codes: C32 E32 E52 (search for similar items in EconPapers)
Date: 2012-09-01
New Economics Papers: this item is included in nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:41263

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