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  3. American Economic Journal: Macroeconomics
  4. October 2022
  5. News Shocks under Financial Frictions

American Economic Journal:
Macroeconomics

ISSN 1945-7707 (Print) | ISSN 1945-7715 (Online)

News Shocks under Financial Frictions

  • Christoph Görtz
  • John D. Tsoukalas
  • Francesco Zanetti
American Economic Journal: Macroeconomics
vol. 14, no. 4, October 2022
(pp. 210–43)
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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.

Citation

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

Additional Materials

JEL Classification

  • E12 General Aggregative Models: Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
  • E31 Price Level; Inflation; Deflation
  • E32 Business Fluctuations; Cycles
  • E44 Financial Markets and the Macroeconomy
  • G12 Asset Pricing; Trading Volume; Bond Interest Rates
  • G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages