Working Paper

Identification of financial factors in economic fluctuations

Author: Francesco Furlanetto, Francesco Ravazzolo, Samad Sarferaz
Series: Working Paper
Number: 9/2014

Working Paper 9/2014 (PDF 539.3 Kb)

We estimate demand, supply, monetary, investment and financial shocks in a VAR identified with a minimum set of sign restrictions on US data. We find that financial shocks are major drivers of fluctuations in output, stock prices and investment but have a limited effect on inflation. In a second step we disentangle shocks originating in the housing sector, shocks originating in credit markets and uncertainty shocks. In the extended set-up financial shocks are even more important and a leading role is played by housing shocks that have large and persistent effects on output.

Published 17 July 2014 15:15