Collateral Shocks

2022 ◽  
Vol 14 (1) ◽  
pp. 83-103
Author(s):  
Yvan Becard ◽  
David Gauthier
Keyword(s):  
Business Cycle ◽  
Financial Sector ◽  
Macroeconomic Model ◽  
Market Sentiment ◽  
Lending Standards ◽  
Joint Dynamics ◽  
The Business Cycle

We estimate a macroeconomic model on US data where banks lend to households and businesses and simultaneously adjust lending requirements on the two types of loans. We find that the collateral shock, a change in the ability of the financial sector to redeploy collateral, is the most important force driving the business cycle. Hit by this unique disturbance, our model quantitatively replicates the joint dynamics of output, consumption, investment, employment, and both household and business credit quantities and spreads. The estimated collateral shock generates accurate movements in lending standards and tracks measures of market sentiment. (JEL E21, E23, E24, E32, E44, G21)

scholarly journals Credit-Market Sentiment and the Business Cycle

2015 ◽  
Author(s):  
David Lopez-Salido ◽  
Jeremy C. Stein ◽  
Egon Zakrajsek
Keyword(s):  
Business Cycle ◽  
Credit Market ◽  
Market Sentiment ◽  
The Business Cycle

scholarly journals Credit-Market Sentiment and the Business Cycle

2016 ◽  
Author(s):  
David López-Salido ◽  
Jeremy Stein ◽  
Egon Zakrajšek
Keyword(s):  
Business Cycle ◽  
Credit Market ◽  
Market Sentiment ◽  
The Business Cycle

scholarly journals Predicting turning points in the South African economy

2003 ◽  
Vol 6 (2) ◽  
pp. 289-303 ◽  
Author(s):  
Elna Moolman
Keyword(s):  
Business Cycle ◽  
South African ◽  
Turning Points ◽  
Economic Indicator ◽  
Macroeconomic Model ◽  
The South ◽  
Macroeconomic Models ◽  
Market Participants ◽  
The Business Cycle

Despite the existence of macroeconomic models and complex business cycle indicators, it would be beneficial to policymakers and market participants if they could look at one well-chosen indicator in predicting business cycle turning points. If one indicator accurately predicts business cycle turning points, it provides an easy way to confirm the predictions of macroeconomic models, or it can eliminate the need for a macroeconomic model if the interest is in the turning points and not in the levels of the business cycle. The objective of this paper is to investigate whether turning points of the South African business cycle can be predicted with only one economic indicator.

scholarly journals Credit-Market Sentiment and the Business Cycle

2015 ◽  
Author(s):  
David Lopez-Salido ◽  
Jeremy C. Stein ◽  
Egon Zakrajsek
Keyword(s):  
Business Cycle ◽  
Credit Market ◽  
Market Sentiment ◽  
The Business Cycle

Post-Keynesian Macroeconomic Models

2014 ◽  
pp. 61-95
Keyword(s):  
Business Cycle ◽  
Financial Markets ◽  
Full Employment ◽  
Aggregate Demand ◽  
Financial Sector ◽  
Economic Equilibrium ◽  
Productive Capacity ◽  
Productivity Analysis ◽  
Macroeconomic Models ◽  
The Business Cycle

The idea that the financial sector can amplify the business cycle dates back to the early 1900s. The main focus of finance and growth literature is the way in which financial markets influence the main drivers of growth (such as investment and savings) and the fluctuations of business cycle indirectly, via their impact on the firms and consumers. Keynesians and post-Keynesians believe that aggregate demand is responsible for achieving full employment and economic equilibrium, and investment is placed at the centre stage to stimulate aggregate demand. Classical theorists favour equilibrium with equalised profit rates, process of production, and full utilisation of productive capacity. Accordingly, this chapter extensively discusses the post-Keynesian literature in investment and productivity analysis, and their approaches to macroeconomic modelling.

Predicting Turning Points of the Business Cycle: Do Financial Sector Variables Help?

2013 ◽  
pp. 63-81 ◽  
Author(s):  
A. Pestova
Keyword(s):  
Business Cycle ◽  
Predictive Power ◽  
Choice Model ◽  
Turning Points ◽  
Financial Sector ◽  
Leading Indicators ◽  
Macroeconomic Dynamics ◽  
Wide Range ◽  
The Business Cycle ◽  
Binary Choice Model

The objective of this study is to develop a system of leading indicators of the business cycle turning points for a wide range of countries, including Russia, over a period of more than thirty years. We use a binary choice model with the dependent variable of the state of economy: the recession, there is no recession. These models allow us to assess how likely is the change of macroeconomic dynamics from positive to negative and vice versa. Empirical analysis suggests that the inclusion of financial sector variables into equation can significantly improve the predictive power of the models of the turning points of business cycles. At the same time, models with financial and real sector variables obtained in the paper outperform the "naive" models based only on the leading indicator of GDP in the OECD methodology due to either a lower level of noise (recession model) or a higher predictive power (model of the recovery from recession).

scholarly journals Credit-Market Sentiment and the Business Cycle

2017 ◽  
Vol 2015 (028r1) ◽  
Author(s):  
David Lopez-Salido ◽  
◽  
Jeremy C. Stein ◽  
Egon Zakrajsek ◽  
◽  
...  
Keyword(s):  
Business Cycle ◽  
Credit Market ◽  
Market Sentiment ◽  
The Business Cycle

scholarly journals Liquidity and the business cycle: Empirical evidence from the Greek banking sector

2013 ◽  
Vol 58 (199) ◽  
pp. 109-125
Author(s):  
Sophocles Vogiazas ◽  
Constantinos Alexiou
Keyword(s):  
Business Cycle ◽  
Banking Sector ◽  
Market Liquidity ◽  
Market Sentiment ◽  
Clear Cut ◽  
Effective Exchange ◽  
The Business Cycle ◽  
Greek Banks ◽  
Asset Quality ◽  
Effective Exchange Rate

In the aftermath of the global financial turmoil the negative market sentiment and the challenging macroeconomic environment in Greece have severely affected the banking sector, which faces funding and liquidity challenges, deteriorating asset quality, and weakening profitability. This paper aims to investigate how banks? liquidity interacted with solvency and the business cycle during the period 2004-2010. To this end a panel of 17 Greek banks is utilized which, in conjunction with cointegrating techniques and one-way static and dynamic panel models, explores the presence and the strength of the relationship between banks? liquidity and the business cycle, while allowing for the role of banks? solvency. Addressing the liquidity risk of the Greek banking sector and the liquidity-solvency nexus remains largely an uncharted area. The results generated provide clear-cut evidence on the linkages between banks? market liquidity and the business cycle, as reflected in the real GDP and the effective exchange rate. Yet the results display a transmission channel that runs from banks? solvency to liquidity and from country risk to bank risk.

scholarly journals Beyond Keynes and the Classics. Outline of the Goods Side/Money Side Model of the Business Cycle and Macroeconomic Configurations

2021 ◽  
pp. 111-135
Author(s):  
Antony P. Mueller
Keyword(s):  
Economic Growth ◽  
Business Cycle ◽  
Aggregate Demand ◽  
Jel Classification ◽  
Macroeconomic Model ◽  
Macroeconomic Analysis ◽  
Palabras Clave ◽  
Demand Models ◽  
The Business Cycle ◽  
Basic Features

This paper presents the goods side/money side (GSMS) model as a novel way of macroeconomic analysis. The GSMS model goes beyond Keynesianism as it makes a sharp distinction between the goods side and the money side and thus avoids the indistinctness between real nominal values that come with spending in aggregate demand models. The GSMS model transcends classical macroeconomics in its traditional and modern versions as it reinstates money as an active factor in the economy. Different from monetarism, the key monetary concept of the GSMS model is «macroeconomic liquidity», which includes velocity of circulation. The present paper presents the basic features of the model and shows its use by analyzing macroeconomic configurations, the business cycle, and economic growth. The paper includes an appendix with an evaluation of macroeconomic configurations in the light of the GSMS model. Key words: GSMS Macroeconomic Model, Monetary Policy, Economic Growth, Austrian Theory of the Business Cycle (ATB). JEL Classification: A23, E32, E52. Resumen: Este trabajo presenta el modelo lado del mercado de bienes/lado del mercado de dinero (GSMS) como una nueva forma de análisis macro-económico. El modelo GSMS va más allá del keynesianismo, ya que hace una clara distinción entre el lado de los bienes y el lado del dinero y, por tanto, evita la ausencia de diferenciación entre los valores nominales y reales que vienen con el gasto en los modelos de demanda agregada. El modelo GSMS trasciende la macroeconomía clásica en sus versiones tradicional y moderna, ya que restituye al dinero un rol activo en la economía. A diferen-cia del monetarismo, el concepto monetario clave del modelo GSMS es la «liquidez macroeconómica», que incluye la velocidad de circulación. El pre-sente artículo presenta las características básicas del modelo y muestra su uso mediante el análisis de configuraciones macroeconómicas, el ciclo eco-nómico y el crecimiento económico. El documento incluye un apéndice con una evaluación de configuraciones macroeconómicas a la luz del modelo GSMS. Palabras clave: Modelo Macroeconómico GSMS, Política Monetaria, Cre - cimiento Económico, Teoría Austriaca del Ciclo Económico. Clasificación JEL: A23, E32, E52.

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