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Europe > Ukraine

You are looking at 1 - 2 of 2 items for :

  • Type: Journal Issue x
  • Econometrics x
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Cover IMF Working Papers
The Market Price of Risk and Macro-Financial Dynamics
Mr. Tobias Adrian
,
Fernando Duarte
, and
Tara Iyer
We propose the conditional volatility of GDP spanned by financial factors as a “Volatility Financial Conditions Index” (VFCI) and show it is closely tied to the market price of risk. The VFCI exhibits superior explanatory power for stock and bond risk premia compared to other FCIs. We use a variety of identification strategies and instruments to demonstrate robust causal relationships between the VFCI and macroeconomic aggregates: a tightening of financial conditions as measured by the VFCI leads to a persistent contraction of output and triggers an immediate easing of monetary policy. Conversely, contractionary monetary policy shocks cause tighter financial conditions.
Keywords:
Macro-Finance; Financial Conditions Index; Monetary Policy; Asset Pricing; Market Price of Risk; Consumption Volatility; Causal Identification; bond risk premia; contractionary monetary policy shock; tightening of financial conditions; VFCI shock; Structural vector autoregression; Consumption; Asset prices; Estimation techniques; Global
Cover IMF Working Papers
Financial Shock Transmission to Heterogeneous Firms: The Earnings-Based Borrowing Constraint Channel
Livia Chiţu
,
Magdalena Grothe
,
Tatjana Schulze
, and
Ine Van Robays
We study the heterogeneous impact of jointly identified monetary policy and global risk shocks on corporate funding costs. We disentangle these two shocks in a structural Bayesian Vector Autoregression framework and investigate their respective effects on funding costs of heterogeneous firms using micro-data for the US. We tease out mechanisms underlying the effects by contrasting traditional financial frictions arising from asset-based collateral constraints with the recent earnings-based borrowing constraint hypothesis, differentiating firms across leverage and earnings. Our empirical evidence strongly supports the earnings-based borrowing constraint hypothesis. We find that global risk shocks have stronger and more heterogeneous effects on corporate funding costs which depend on firms' position within the earnings distribution.
Keywords:
Corporate spreads; earnings-based borrowing constraint; heterogeneous firms; monetary policy shocks; global risk shocks; constraint hypothesis; borrowing constraint channel; shock transmission; earnings distribution; funding cost; tail firm; Bonds; Wages; Corporate bonds; Asset prices; Monetary tightening; Global