A Unified Approach for Jointly Estimating the Business and Financial Cycle, and the Role of Financial Factors
| Autor: | Benjamin Wong, Julia Richter, Tino Berger |
|---|---|
| Rok vydání: | 2022 |
| Předmět: |
Economics and Econometrics
Control and Optimization media_common.quotation_subject Recession Financial Cycle 0502 economics and business Business cycle Economics ddc:330 050207 economics E51 media_common E32 Financial shocks Finance 050208 finance business.industry Applied Mathematics C18 05 social sciences Business Cycle Bayesian vector autoregression Shock (economics) Econometric and statistical methods Output gap 8. Economic growth Credit cycle Econometrics not elsewhere classified business Financial sector |
| DOI: | 10.26180/21529587 |
| Popis: | We jointly estimate the U.S. business and financial cycle through a unified empirical approach while simultaneously accounting for the role of financial factors. Our approach uses the Beveridge-Nelson decomposition within a medium-scale Bayesian Vector Autoregression. First, we show, both in reduced form and when we identify a structural financial shock, that variation in financial factors had a larger role post-2000 and a more modest role pre-2000. Our results suggest that the financial sector did play a role in overheating the business cycle pre-Great Recession. Second, while we document a positive unconditional correlation between the credit cycle and the output gap, the correlation of the lagged credit cycle and the contemporaneous output gap turns negative when we condition on a financial shock. The sign-switch suggests that the nature of the underlying shocks may be important for understanding the relationship between the business and financial cycles. |
| Databáze: | OpenAIRE |
| Externí odkaz: |
|