Dynamic Interactions Between Financial and Macroeconomic Imbalances: A Panel VAR Analysis
By: Adarov, Amat.
Material type:
BookSeries: wiiw Working Papers: 162Publisher: Wien : Wiener Institut für Internationale Wirtschaftsvergleiche (wiiw), 2019Description: 32 S., 7 Tables and 12 Figures, 30cm.Subject(s): financial cycles | macroeconomic imbalances | financial stability | business cycles | panel VAR | Bayesian VARCountries covered: non specificwiiw Research Areas: Macroeconomic Analysis and PolicyClassification: E44 | F32 | G15 | F4 Online resources: Click here to access online Summary: We use Bayesian and GMM panel VAR frameworks to study interactions between financial cycles and macroeconomic imbalances based on a global sample of 24 countries spanning the period 1998‑2012. We find that financial cycles play an important role in shaping macroeconomic imbalances with expansions inducing economic overheating and a downward pressure on public debt-to-GDP ratios, and vice versa. Bank-based economies exhibit a deeper and faster response of business cycles to financial misalignments, while the impact in market-based economies is milder, but more persistent, as well as more significant for current account and public debt dynamics. Financial cycles invoke a particularly strong reaction of current account balances and especially public debt ratios in the euro area.
| Item type | Current library | Call number | Status | Date due | Barcode | |
|---|---|---|---|---|---|---|
| Paper | WIIW Library | 5.700/162 (Browse shelf(Opens below)) | Available | 1000010004800 |
We use Bayesian and GMM panel VAR frameworks to study interactions between financial cycles and macroeconomic imbalances based on a global sample of 24 countries spanning the period 1998‑2012. We find that financial cycles play an important role in shaping macroeconomic imbalances with expansions inducing economic overheating and a downward pressure on public debt-to-GDP ratios, and vice versa. Bank-based economies exhibit a deeper and faster response of business cycles to financial misalignments, while the impact in market-based economies is milder, but more persistent, as well as more significant for current account and public debt dynamics. Financial cycles invoke a particularly strong reaction of current account balances and especially public debt ratios in the euro area.
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