Financial Shocks and the Real Economy in a Nonlinear World: A Survey of the Theoretical and Empirical Literature

37 Pages Posted: 18 Apr 2015

Date Written: January 22, 2015

Abstract

In this paper we present an overview of theoretical and empirical contributions exploring the inter-linkages between financial factors and real economic activity. We first revisit the main theoretical approaches that allow financial frictions to be embedded into general equilibrium models, and then we survey, from an empirical perspective, the most recent papers focusing on macro-financial linkages, with a particular emphasis on works dealing with parameter time variation and other types of nonlinearities. We conclude by discussing some policy implications and suggesting directions for future research.

Keywords: financial shocks, credit, financial crisis, nonlinearity

JEL Classification: C32, E32, E44, E58

Suggested Citation

Silvestrini, Andrea and Zaghini, Andrea, Financial Shocks and the Real Economy in a Nonlinear World: A Survey of the Theoretical and Empirical Literature (January 22, 2015). Bank of Italy Occasional Paper No. 255, Available at SSRN: https://ssrn.com/abstract=2595125 or http://dx.doi.org/10.2139/ssrn.2595125

Andrea Silvestrini (Contact Author)

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

Andrea Zaghini

Bank of Italy ( email )

Via Nazionale 91
Rome, 00184
Italy

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