Identification of Financial Factors in Economic Fluctuations

KOF Working Paper No. 364

Norges Bank Working Paper 09 | 2014

57 Pages Posted: 14 Aug 2014

See all articles by Francesco Furlanetto

Francesco Furlanetto

Norges Bank

Francesco Ravazzolo

Free University of Bozen-Bolzano - Faculty of Economics and Management; BI Norwegian Business School

Samad Sarferaz

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich

Date Written: July 31, 2014

Abstract

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.

Keywords: VAR, sign restrictions, financial shocks, external finance premium, housing, uncertainty

JEL Classification: C11, C32, E32

Suggested Citation

Furlanetto, Francesco and Ravazzolo, Francesco and Sarferaz, Samad, Identification of Financial Factors in Economic Fluctuations (July 31, 2014). KOF Working Paper No. 364; Norges Bank Working Paper 09 | 2014. Available at SSRN: https://ssrn.com/abstract=2479790 or http://dx.doi.org/10.2139/ssrn.2479790

Francesco Furlanetto

Norges Bank ( email )

P.O. Box 1179
Oslo, N-0107
Norway

Francesco Ravazzolo

Free University of Bozen-Bolzano - Faculty of Economics and Management ( email )

Via Sernesi 1
39100 Bozen-Bolzano (BZ), Bozen 39100
Italy

BI Norwegian Business School ( email )

Nydalsveien 37
Oslo, 0442
Norway

HOME PAGE: http://www.francescoravazzolo.com/

Samad Sarferaz (Contact Author)

ETH Zürich - CER-ETH - Center of Economic Research at ETH Zurich ( email )

Zürichbergstrasse 18
Zurich, 8092
Switzerland

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