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Title: Time Variation in Macro-Financial Linkages

Author(s): Sandra Eickmeier, Massimiliano Marcellino and Esteban Prieto

Publication Date: April 2013

Keyword(s): Financial shocks, Global Financial Crisis, macro-financial linkages and time-varying parameter VAR model

Programme Area(s): International Macroeconomics

Abstract: We analyze the contribution of credit spread, house and stock price shocks to GDP growth in the US based on a Bayesian VAR with time-varying parameters estimated over 1958-2012. Our main findings are: (i) The contribution of financial shocks to GDP growth fluctuates from about 20 percent in normal times to 50 percent during the global financial crisis. (ii) The Great Recession and the subsequent weak recovery can largely be traced back to negative housing shocks. (iii) Housing shocks have become more important for the real economy since the early-2000s, and negative housing shocks are more important than positive ones.

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Bibliographic Reference

Eickmeier, S, Marcellino, M and Prieto, E. 2013. 'Time Variation in Macro-Financial Linkages'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=9436