Open Conference Systems, Lyon Meeting

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Financial Instability and the Euro Area Macroeconomic Dynamics
Stéphane Lhuissier

Building: Site Descartes
Room: F101
Date: 2014-06-16 03:00 PM – 03:30 PM
Last modified: 2014-06-04


This paper characterizes the dynamics of the real effects of shocks in financial sector in the post-Euro introduction period. It does so by confronting a number of structural Bayesian vector autoregressions with several possible patterns of time variation in coefficients and disturbance variances. The results consistently show a one-time financial shock, in periods of 'financial turmoil', as having a negative effect on output more than twice as large as the one in 'tranquil' times. This results from changes only in the behavior of the financial system, as long as heteroskedasticity is properly taken into account. Changing dynamics turn out to be crucial in explaining macroeconomic variability.


Macro-financial linkages; Financial shocks; Business cycles; Markov-switching; Structural VARs; Bayesian methods; Recursive identification

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