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Macro-finance interactions in the US: A global perspective

Author

Listed:
  • Fabio C. Bagliano

    (Department of Economics and Public Finance "G. Prato", University of Torino)

  • Claudio Morana

    (Department of Economics, University of Milan-Bicocca)

Abstract

The paper aims at understanding the main channels of macro-finance interaction that have featured in the US recent 'Great Recession' episode. Domestic interactions of macro and financial shocks are investigated within a global framework, allowing for spillover effects of the US crisis to other OECD countries, as well as to major emerging economies, and controlling for further feedback effects on the US economy. A total of 50 countries is investigated by means of a large-scale open economy macroeconometric model, set in the factor vector autoregressive (F-VAR) framework, over the period 1980:1-2009:1. The overall picture appears to be consistent with a boom-bust credit cycle mechanism, whereby financial factors are the triggering force of the downturn in real activity and worsened economic conditions feed back to asset prices, starting a cumulative process.

Suggested Citation

  • Fabio C. Bagliano & Claudio Morana, 2011. "Macro-finance interactions in the US: A global perspective," Working papers 23, Former Department of Economics and Public Finance "G. Prato", University of Torino.
    • Handle: RePEc:tur:wpaper:23
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    File URL: http://www.bemservizi.unito.it/repec/tur/wpaper/n23.pdf
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    More about this item

    Keywords

    Macro-finance interactions; financial crisis; economic crisis; international business cycles; factor vector autoregressive models;
    All these keywords.

    JEL classification:

    • C22 - Mathematical and Quantitative Methods - - Single Equation Models; Single Variables - - - Time-Series Models; Dynamic Quantile Regressions; Dynamic Treatment Effect Models; Diffusion Processes
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • F36 - International Economics - - International Finance - - - Financial Aspects of Economic Integration

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