FINANCIAL SHOCKS AND THE REAL ECONOMY IN A NONLINEAR WORLD: FROM THEORY TO ESTIMATION
Andrea Silvestrini and
Andrea Zaghini ()
Working Papers of Faculty of Economics and Business Administration, Ghent University, Belgium from Ghent University, Faculty of Economics and Business Administration
We examine the inter-linkages between financial factors and real economic activity. We review the main theoretical approaches that allow financial frictions to be embedded into general equilibrium models. We outline, from a policy perspective, the most recent empirical papers focusing on the propagation of exogenous shocks to the economy, with a particular emphasis on works dealing with time variation of parameters and other types of nonlinearities. We then present an application to the analysis of the changing transmission of financial shocks in the euro area. Results show that the effects of a financial shock are time-varying and contingent on the state of the economy. They are of negligible importance in normal times but they greatly matter in conditions of stress.
Keywords: financial crisis; nonlinearities; financial shocks (search for similar items in EconPapers)
JEL-codes: C32 E32 E44 E58 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-mac
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Journal Article: Financial shocks and the real economy in a nonlinear world: From theory to estimation (2015)
Working Paper: Financial shocks and the real economy in a nonlinear world: From theory to estimation (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:rug:rugwps:15/910
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