scholarly journals Feedbacks: Financial Markets and Economic Activity

2021 ◽  
Vol 111 (6) ◽  
pp. 1845-1879 ◽  
Author(s):  
Markus Brunnermeier ◽  
Darius Palia ◽  
Karthik A. Sastry ◽  
Christopher A. Sims
Keyword(s):  
Financial Markets ◽  
Economic Activity ◽  
Output Growth ◽  
Structural Var ◽  
Credit Spreads ◽  
Reduced Form ◽  
Var Model ◽  
Policy Response ◽  
Financial Deepening ◽  
Credit Expansion

Is credit expansion a sign of desirable financial deepening or the prelude to an inevitable bust? We study this question in modern US data using a structural VAR model of 10 monthly frequency variables, identified by heteroskedasticity. Negative reduced-form responses of output to credit growth are caused by endogenous monetary policy response to credit expansion shocks. On average, credit and output growth remain positively associated. “Financial stress” shocks to credit spreads cause declines in output and credit levels. Neither credit aggregates nor spreads provide much advance warning of the 2008–2009 crisis, but spreads improve within-crisis forecasts. (JEL C51, E23, E31, E43, E44, E52, G01)

scholarly journals Iceland

2019 ◽  
Vol 2019 (375) ◽  
Author(s):  
Keyword(s):  
Financial Markets ◽  
Economic Activity ◽  
World Trade ◽  
Domestic Demand ◽  
Policy Response ◽  
Supply Disruptions ◽  
Recent Growth ◽  
Tourism Activity ◽  
Global Growth ◽  
Growth Economic

After years of robust growth, economic activity has significantly weakened. Supply disruptions in tourism, the engine of recent growth, and the associated uncertainty have triggered a drop in domestic demand and an increase in unemployment. A swift policy response, with fiscal relaxation and monetary easing, has stabilized expectations and cushioned the effects. A moderate but fragile growth recovery is expected in 2020. Significant downside risks weigh on the outlook. World trade tensions and weaker than expected global growth, the UK’s still uncertain Brexit process, worsening of tourism activity in Iceland, and pressures in financial markets or payments due to Iceland’s grey-listing by the FATF could negatively impact the economy.

HAS INFLATION PERSISTENCE IN INDIA CHANGED OVER TIME?

2015 ◽  
Vol 60 (04) ◽  
pp. 1550095 ◽  
Author(s):  
JOICE JOHN
Keyword(s):  
Stochastic Volatility ◽  
Output Growth ◽  
Reduced Form ◽  
Var Model ◽  
Time Varying ◽  
Inflation Persistence ◽  
Monthly Data ◽  
Increasing Trend ◽  
Vector Auto Regression ◽  
Auto Regression

The temporal movement of reduced form inflation persistence for India was estimated using time-varying autoregressive models with stochastic volatility, using monthly data from April 2004 to June 2012. The results suggested an increasing trend in inflation persistence in India during 2004–2009, which had fallen down subsequently. Structural persistence was studied using a time-varying vector auto regression (VAR) model with inflation, output growth and interest rate as variables using quarterly data from 1996–1997 to 2011–2012. The results suggested that the inflation persistence which was higher in 2009 and 2010, had subsequently moderated.

The effects of fiscal policy in a small open transition economy: The case of Croatia

2014 ◽  
Vol 64 (Supplement-1) ◽  
pp. 133-152 ◽  
Author(s):  
Milan Deskar-Škrbić ◽  
Hrvoje Šimović ◽  
Tomislav Ćorić
Keyword(s):  
Government Spending ◽  
Economic Activity ◽  
Private Consumption ◽  
Transition Economy ◽  
Aggregate Demand ◽  
Private Investment ◽  
Structural Var ◽  
Var Model ◽  
Dynamic Effects ◽  
Indirect Taxes

In this paper, we use the structural VAR model to analyse the dynamic effects of (discretionary) fiscal shocks on the economic activity of the private sector in Croatia between 2000 and 2012. Due to the fact that Croatia is a small open transition economy, we assume that shocks of foreign origin can have notable effects on its performance. Therefore, the original Blanchard-Perotti identification method is extended by introducing variables that represent external (foreign) demand shocks. The results show that government spending has a positive and statistically significant effect on private aggregate demand and private consumption, and that net indirect taxes have a negative and statistically significant effect on private consumption and private investment.

The persistent effect of banking crises on investment and the role of financial markets

2014 ◽  
Vol 6 (1) ◽  
pp. 64-77 ◽  
Author(s):  
Felix Rioja ◽  
Fernando Rios-Avila ◽  
Neven Valev
Keyword(s):  
Financial Markets ◽  
Financial Development ◽  
Banking Crisis ◽  
Banking Crises ◽  
Output Growth ◽  
Long Term Effects ◽  
Content Type ◽  
Negative Effect

Purpose – While the literature studying the effect of banking crises on real output growth rates has found short-lived effects, recent work has focused on the level effects showing that banking crises can reduce output below its trend for several years. This paper aims to investigate the effect of banking crises on investment finding a prolonged negative effect. Design/methodology/approach – The authors test to see whether investment declines after a banking crisis and, if it does, for how long and by how much. The paper uses data for 148 countries from 1963 to 2007. Econometrically, the authors test how banking crises episodes affect investment in future years after controlling for other potential determinants. Findings – The authors find that the investment to GDP ratio is on average about 1.7 percent lower for about eight years following a banking crisis. These results are robust after controlling for credit availability, institutional characteristics, and a host of other factors. Furthermore, the authors find that the size and duration of this adverse effect on investment varies according to the level of financial development of a country. The largest and longer-lasting decrease in investment is found in countries in a middle region of financial development, where finance plays its most important role according to theory. Originality/value – The authors contribute by finding that banking crisis can have long-term effects on investment of up to nine years. Further, the authors contribute by finding that the level of development of the country's financial markets affects the duration of this decrease in investment.

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