Identification of financial factors in economic fluctuations
Journal article, Peer reviewed
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Original versionEconomic Journal. 2019, 129 (617), 311-337. 10.1111/ecoj.12520
We estimate demand, supply, monetary, investment and financial shocks in a VAR identified with a minimum set of sign restrictions on US data. We find that financial shocks are major drivers of fluctuations in output, stock prices and investment but have a limited effect on inflation. In a second step, we disentangle shocks originating in the housing sector, shocks originating in credit markets and uncertainty shocks. In the extended set‐up, financial shocks are even more important and a leading role is played by housing shocks that have large and persistent effects on output.