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Credit Spread, Financial Market and Real Activities under Financial Instability: Empirical Evidence with MS-SBVAR

Author

Listed:
  • Satoshi Tezuka

    (Graduate School of Economics, Kobe University)

  • Yoichi Matsubayashi

    (Graduate School of Economics, Kobe University)

Abstract

The purpose of the paper is to show how widening credit spreads in "unstable periods" influence the primary markets, the lending markets, and production activities, in comparison with stable periods. The MS-SBVAR identifies the 2008 global financial crisis and the 2011 great East Japan earthquake as unstable periods. During unstable periods, negative shocks influence industrial activities and bond issuance, while outstanding loans are affected by positive shocks, which results from the banks in Japan remaining their financial health. In addition, marginal research is conducted, using a "modified credit spread," which eases the excess impact of the great East Japan earthquake on credit spreads. It is confirmed that the results are constant, although the regime of the disturbance terms corresponds to other events.

Suggested Citation

  • Satoshi Tezuka & Yoichi Matsubayashi, 2018. "Credit Spread, Financial Market and Real Activities under Financial Instability: Empirical Evidence with MS-SBVAR," Discussion Papers 1812, Graduate School of Economics, Kobe University.
    • Handle: RePEc:koe:wpaper:1812
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