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: Suggested Citation