Change search
ReferencesLink to record
Permanent link

Direct link
The importance of the financial system for the real economy
Uppsala University, Disciplinary Domain of Humanities and Social Sciences, Faculty of Social Sciences, Department of Statistics.
Swedish National Debt Office, Stockholm, Sweden.
Ministry of Finance, Stockholm, Sweden.
2016 (English)In: Empirical Economics, ISSN 0377-7332, E-ISSN 1435-8921Article in journal (Refereed) Published
Abstract [en]

This paper first describes financial variables that have been constructed to correspond to various channels in the transmission mechanism. Next, a Bayesian VAR model for the macroeconomy, with priors on the steady states, is augmented with these financial variables and estimated using Swedish data for 1989–2015. The results support three conclusions. First, the financial system is important and the strength of the results is dependent on identification, with the financial variables accounting for 10–25 % of the forecast error variance of Swedish GDP growth. Second, the suggested model produces an earlier signal regarding the probability of recession, compared to a model without financial variables. Third, the model’s forecasts for the deep downturn in 2008 and 2009, conditional on the development of the financial variables, outperform a macro-model that lacks financial variables. Furthermore, this improvement in modelling Swedish GDP growth during the financial crisis does not come at the expense of unconditional predictive power. Taken together, the results suggest that the proposed model presents an accessible possibility to analyse the macro-financial linkages and the GDP developments, especially during a financial crisis.

Place, publisher, year, edition, pages
Keyword [en]
Transmission channels, Financial indicators, Macroeconomy, Business cycle, Credit cycle, Bayesian VAR
National Category
Research subject
URN: urn:nbn:se:uu:diva-306161DOI: 10.1007/s00181-016-1175-4OAI: diva2:1039861
Available from: 2016-10-25 Created: 2016-10-25 Last updated: 2016-10-26Bibliographically approved

Open Access in DiVA

fulltext(1033 kB)89 downloads
File information
File name FULLTEXT02.pdfFile size 1033 kBChecksum SHA-512
Type fulltextMimetype application/pdf

Other links

Publisher's full text

Search in DiVA

By author/editor
Ankargren, Sebastian
By organisation
Department of Statistics
In the same journal
Empirical Economics

Search outside of DiVA

GoogleGoogle Scholar
Total: 89 downloads
The number of downloads is the sum of all downloads of full texts. It may include eg previous versions that are now no longer available

Altmetric score

Total: 298 hits
ReferencesLink to record
Permanent link

Direct link