Nonlinearities in the Transmission Between Financial Stress, Monetary Policy and the Business Cycle - a Threshold VAR Approach
(2017) NEKN01 20171Department of Economics
- Abstract
- This paper investigates nonlinear transmissions between financial stress, monetary policy and the business cycle. Using a threshold VAR model on Swedish quarterly data the presence of nonlinearities in aforementioned transmission is corroborated by the nonlinearity-test suggested by Hansen (1996). Further, a nonlinear impulse-response analysis reveals several results worthwhile mentioning; (i) shocks occurring in a financially stressful regime on average seem to have a greater impact on GDP growth; (ii) monetary policy shocks during financially stressful times seem to have a greater and more immediate but less persistent effect on output growth; (iii) financial shocks occurring in times already characterized by high financial stress create... (More)
- This paper investigates nonlinear transmissions between financial stress, monetary policy and the business cycle. Using a threshold VAR model on Swedish quarterly data the presence of nonlinearities in aforementioned transmission is corroborated by the nonlinearity-test suggested by Hansen (1996). Further, a nonlinear impulse-response analysis reveals several results worthwhile mentioning; (i) shocks occurring in a financially stressful regime on average seem to have a greater impact on GDP growth; (ii) monetary policy shocks during financially stressful times seem to have a greater and more immediate but less persistent effect on output growth; (iii) financial shocks occurring in times already characterized by high financial stress create larger contractions in output growth compared to those occurring under low financial stress and (iv); positive GDP growth shocks starting in periods characterized by high financial stress seem to worsen the level of financial stress. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/8913443
- author
- Warström, Olle LU
- supervisor
- organization
- course
- NEKN01 20171
- year
- 2017
- type
- H1 - Master's Degree (One Year)
- subject
- keywords
- Financial Stress, Transmission mechanism, nonlinearities
- language
- English
- id
- 8913443
- date added to LUP
- 2017-07-10 13:52:55
- date last changed
- 2017-07-10 13:52:55
@misc{8913443, abstract = {{This paper investigates nonlinear transmissions between financial stress, monetary policy and the business cycle. Using a threshold VAR model on Swedish quarterly data the presence of nonlinearities in aforementioned transmission is corroborated by the nonlinearity-test suggested by Hansen (1996). Further, a nonlinear impulse-response analysis reveals several results worthwhile mentioning; (i) shocks occurring in a financially stressful regime on average seem to have a greater impact on GDP growth; (ii) monetary policy shocks during financially stressful times seem to have a greater and more immediate but less persistent effect on output growth; (iii) financial shocks occurring in times already characterized by high financial stress create larger contractions in output growth compared to those occurring under low financial stress and (iv); positive GDP growth shocks starting in periods characterized by high financial stress seem to worsen the level of financial stress.}}, author = {{Warström, Olle}}, language = {{eng}}, note = {{Student Paper}}, title = {{Nonlinearities in the Transmission Between Financial Stress, Monetary Policy and the Business Cycle - a Threshold VAR Approach}}, year = {{2017}}, }