Title:	Transmission of financial stress shocks between the USA and the Euro area during different business cycle phases
Authors:	Dajčman, Silvo Kavkler, Alenka Mikek, Peter Romih, Dejan
Citation:	E+M. Ekonomie a Management = Economics and Management. 2020, roč. 23, č. 4, s. 152-165.
Issue Date:	2020
Publisher:	Technická univerzita v Liberci
Document type:	článek article
URI:	http://hdl.handle.net/11025/42227
ISSN:	1212-3609 (Print) 2336-5604 (Online)
Keywords:	finanční stres;mezinárodní přenos finančního stresu;obchodní a finanční cykly;nelinearita;threshold VAR
Keywords in different language:	financial stress;international transmission of financial stress;business and financial cycles;nonlinearity;threshold VAR
Abstract in different language:	This paper examines the transmission of financial stress shocks between the USA and the euro area for recessionary and non-recessionary regimes in the shock-recipient economy. The investigated period is 1999M1–2017M11, which includes several episodes of recessionary and non-recessionary regimes, endogenously determined by the model, as well as several financial stress episodes. After testing for non-linearity, we employ a five-variable Bayesian threshold vector autoregression model using internationally compatible data for financial stress indices. Our results show significant non-linearities in the financial stress-business cycle interactions for the euro area. In comparison to the non-recessionary regime, the US financial stress shocks are more detrimental to the stability of the European financial system, output growth, and inflation in recessions. US financial stress shocks negatively affect euro area unemployment rate, but the effect is independent of the euro area industrial production growth regime. In contrast, the stability of the US financial system is not susceptible to the euro area’s financial stress shocks. However, due to trade ties, the financial stress in the euro area does lead to output contraction, while not affecting inflation and unemployment in the US. We also found that US industrial production growth and unemployment rate are susceptible to domestic financial stress shocks, more in the recessionary than non-recessionary episodes of the US economy. The results suggest a need for a careful domestic and foreign financial stress monitoring and coordination of monetary authorities. While this may profit both economic areas, this is relevant more for the European Central Bank than its US counterpart.
Rights:	CC BY-NC 4.0
Appears in Collections:	Číslo 4(2020) Číslo 4(2020)

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