Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
7356601 | Journal of Banking & Finance | 2018 | 24 Pages |
Abstract
We examine the link between financial market illiquidity and macroeconomic dynamics by fitting a Bayesian time-varying parameter VAR with stochastic volatility to UK data from 1988Q1 to 2016Q4. We capture liquidity conditions in the stock market using a battery of illiquidity proxies. This paper departs from previous studies examining macro-financial linkages by using theoretically grounded sign restrictions, and conducting structural inference in a non-linear framework. We document both statistically significant differences in the transmission of these shocks, and substantial increases in the economic importance of these shocks during the 2008 recession.
Related Topics
Social Sciences and Humanities
Economics, Econometrics and Finance
Economics and Econometrics
Authors
Michael Ellington,