DP9470 Dynamic Effects of Credit Shocks in a Data-Rich Environment

Author(s): Jean Boivin, Marc Giannoni, Dalibor Stevanovic
Publication Date: May 2013
Keyword(s): Credit shock, Structural factor analysis
JEL(s): C32, E32, E44
Programme Areas: International Macroeconomics
Link to this Page: cepr.org/active/publications/discussion_papers/dp.php?dpno=9470

We examine the dynamic effects of credit shocks using a large data set of U.S. economic and financial indicators in a structural factor model. The identified credit shocks, interpreted as unexpected deteriorations of credit market conditions, immediately increase credit spreads, decrease rates on Treasury securities, and cause large and persistent downturns in the activity of many economic sectors. Such shocks are found to have important effects on real activity measures, aggregate prices, leading indicators, and credit spreads. Our identification procedure does not require any timing restrictions between the financial and macroeconomic factors, and yields interpretable estimated factors.