News shocks under financial frictions

Christoph Gortz; John Tsoukalas; Francesco Zanetti

doi:10.1257/mac.20170066

News shocks under financial frictions

Christoph Gortz, John Tsoukalas, Francesco Zanetti

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Abstract

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.

Original language	English
Pages (from-to)	210-243
Number of pages	34
Journal	American Economic Journal: Macroeconomics
Volume	14
Issue number	4
DOIs	https://doi.org/10.1257/mac.20170066
Publication status	Published - 31 Oct 2022

Keywords

TFP News shocks
Business cycles
DSGE
VAR
Bayesian estimation

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10.1257/mac.20170066Licence: None: All rights reserved

GörtzC2021News
This is the accepted manuscript for an article published in American Economic Journal: Macroeconomics: Görtz, Christoph, John D. Tsoukalas, and Francesco Zanetti. 2022. "News Shocks under Financial Frictions." American Economic Journal: Macroeconomics, 14 (4): 210-43. DOI: 10.1257/mac.20170066, Copyright © 2022 AEA (American Economic Association)
Accepted author manuscript, 1.54 MBLicence: Other (please specify with Rights Statement)

Cite this

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News shocks under financial frictions

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Keywords

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