American Economic Journal: Macroeconomics
no. 4, October 2022
We examine the dynamic effects of TFP news shocks in the context of frictions in financial markets. We document two new facts. First, a shock to future TFP generates a significant decline in credit spread indicators along with a robust improvement in credit supply indicators. Second, we establish a tight link between TFP news shocks and shocks that explain the majority of unforecastable movements in credit spread indicators. A DSGE model enriched with a financial sector of the Gertler-Kiyotaki-Karadi type generates very similar quantitative dynamics.
Görtz, Christoph, John D. Tsoukalas, and Francesco Zanetti.
"News Shocks under Financial Frictions."
American Economic Journal: Macroeconomics,
General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
Price Level; Inflation; Deflation
Business Fluctuations; Cycles
Financial Markets and the Macroeconomy
Asset Pricing; Trading Volume; Bond Interest Rates
Banks; Depository Institutions; Micro Finance Institutions; Mortgages