IMF Working Papers

Accounting for Macrofinancial Fluctuations and Turbulence

By Francis Vitek

November 8, 2018

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Francis Vitek. Accounting for Macrofinancial Fluctuations and Turbulence, (USA: International Monetary Fund, 2018) accessed November 21, 2024

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Summary

This paper investigates the sources of macrofinancial fluctuations and turbulence within the framework of an approximate linear dynamic stochastic general equilibrium model of the world economy, augmented with structural shocks exhibiting potentially asymmetric generalized autoregressive conditional heteroskedasticity. Very strong evidence of asymmetric autoregressive conditional heteroskedasticity is found, providing a basis for jointly decomposing the levels and volatilities of key macrofinancial variables into time varying contributions from sets of shocks. Risk premia shocks are estimated to contribute disproportionately to cyclical output fluctuations and turbulence during swings in financial conditions, across the fifteen largest national economies in the world.

Subject: Banking, Consumption, Financial institutions, Imports, International trade, Loans, Mortgages, National accounts, Return on investment

Keywords: Autoregressive conditional heteroskedasticity, Constant returns to scale, Consumption, Contagion economy, Demand shock, Dynamic stochastic general equilibrium model, Global, Good firm, Imports, Loans, Macrofinancial analysis, Marginal revenue, Markup shock, Maximization problem, Mortgages, Physical capital, Price inflation, Production function, Return on investment, Shadow price, Stochastic process, Transfer payment, Utility function, World economy, WP

Publication Details

  • Pages:

    74

  • Volume:

    ---

  • DOI:

    ---

  • Issue:

    ---

  • Series:

    Working Paper No. 2018/238

  • Stock No:

    WPIEA2018238

  • ISBN:

    9781484381571

  • ISSN:

    1018-5941