Heterogeneity and Cross-Country Spillovers in Macroeconomic-Financial Linkages
48 Pages Posted: 23 Dec 2012
Date Written: December 21, 2012
We investigate heterogeneity and spillovers in macro-financial linkages across developed economies, with a particular emphasis on the most recent recession. A panel Bayesian VAR model including real and financial variables identifies a statistically significant common component, which proves to be very significant during the most recent recession. Nevertheless, country-specific factors remain important, which explains the heterogeneous behaviour across countries observed over time. Moreover, spillovers across countries and between real and financial variables are found to matter: a shock to a variable in a given country affects all other countries, and the transmission seems to be faster and deeper between financial variables than between real variables. Finally, shocks spill over in a heterogeneous way across countries.
Keywords: financial crisis, macro-financial linkages, panel VAR models
JEL Classification: C11, C33, E32, F44
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