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Financial Frictions in Data: Evidence and Impact
Author:
Marzie Taheri Sanjani
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Series:
IMF Working Papers
Volume/Issue:
Volume 2014: Issue 238
Language:
English
Publication Date:
24 Dec 2014
DOI:
https://doi.org/10.5089/9781484336557.001
ISBN:
9781484336557
ISSN:
1018-5941
Pages:
33
Keywords:
WP; default risk; monetary policy shock; contractionary monetary policy; VAR model; Financial Frictions; Bayesian VAR; External Financing Premium; Liquidity risk; Financial shocks; Generalized IRF; DSGE; corporate bond bond yield; risk channel; monetary policy transmission; maturity mismatch risk; expansionary monetary policy shock; modelsempirical Vector Auto Regression; default risk channel; Debt default; Credit; Vector autoregression; Bond yields
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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This paper investigates financial frictions in US postwar data to understand the interaction between the real business cycle and the credit market. A Bayesian estimation technique is used to estimate a large Vector Autoregression and New Keynesian models demonstrating how financial shocks can have a large and sluggish impact on the economy. I identify the default risk and the maturity mismatch channels of monetary policy transmission; I further employ a generalized-IRF to establish countercyclicality of risk spreads; and I show that the maturity mismatch shocks produce a stronger impact than the default risk shocks.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund
Volume 2014: Issue 238