TY - UNPB

T1 - Financial shocks and economic activity

T2 - A high frequency approach

AU - Miescu, Mirela

AU - Mumtaz, Haroon

PY - 2020/7/1

Y1 - 2020/7/1

N2 - We investigate the effects of US financial shocks on economic activity in astructural mixed frequency VAR model that incorporates daily and lower frequencydata. The VAR is identified with a heteroscedasticity-based event study approach. The identifying assumption is that financial shocks are more volatile than other disturbances during high profile financial events. We find that a favorable financial shock that increases asset prices leads to a rise in real activity, house prices and short term rates while it decreases unemployment, uncertainty, credit and term spreads. The financial shock has substantial effects across the borders as well, triggering a strong and synchronized increase in asset prices and industrial production in the rest of the G7 countries.

AB - We investigate the effects of US financial shocks on economic activity in astructural mixed frequency VAR model that incorporates daily and lower frequencydata. The VAR is identified with a heteroscedasticity-based event study approach. The identifying assumption is that financial shocks are more volatile than other disturbances during high profile financial events. We find that a favorable financial shock that increases asset prices leads to a rise in real activity, house prices and short term rates while it decreases unemployment, uncertainty, credit and term spreads. The financial shock has substantial effects across the borders as well, triggering a strong and synchronized increase in asset prices and industrial production in the rest of the G7 countries.

KW - financial shocks

KW - event study

KW - heteroscedasticity identification

KW - structural VAR

M3 - Working paper

T3 - Economics Working Papers Series

BT - Financial shocks and economic activity

PB - Lancaster University, Department of Economics

CY - Lancaster

ER -