Exploring Interactions between Real Activity and the Financial Stance

Journal of Financial Stability, Vol. 1, No. 3, pp. 308-341, April 2005

Posted: 11 Jan 2005

See all articles by Tor Jacobson

Tor Jacobson

Sveriges Riksbank - Research Division

Jesper Lindé

Sveriges Riksbank - Research Division

Kasper Roszbach

Norges Bank - Research Department; University of Groningen - Faculty of Economics and Business

Abstract

In this paper we empirically study interactions between real activity and the financial stance. Using aggregate data we examine a number of candidate measures of the financial stance of the economy. We find strong evidence for substantial spillover effects on aggregate activity from our preferred measure. Given this result, we use a large micro data-set for corporate firms to develop a macro-micro model of the interaction between the financial and real economy. This approach implies that the impulse responses of a given aggregate shock will depend on the portfolio structure of firms at any given point in time.

Keywords: Default risk models, business cycles, price stability, financial stability, financial and real interaction

JEL Classification: C41, G21, G33, G38

Suggested Citation

Jacobson, Tor and Linde, Jesper and Roszbach, Kasper F., Exploring Interactions between Real Activity and the Financial Stance . Journal of Financial Stability, Vol. 1, No. 3, pp. 308-341, April 2005, Available at SSRN: https://ssrn.com/abstract=646541 or http://dx.doi.org/10.2139/ssrn.646541

Tor Jacobson

Sveriges Riksbank - Research Division ( email )

S-103 37 Stockholm
Sweden
+46 8 787 0000 (Phone)

HOME PAGE: www.riksbank.com

Jesper Linde (Contact Author)

Sveriges Riksbank - Research Division ( email )

S-103 37 Stockholm
Sweden
+46 8 787 0873 (Phone)

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

Kasper F. Roszbach

Norges Bank - Research Department ( email )

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

University of Groningen - Faculty of Economics and Business ( email )

Department of Economics, Econometrics and Finance
Nettelbosje 2
Groningen, NL 9747 AE
Netherlands

HOME PAGE: http://www.rug.nl/staff/k.f.roszbach/

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