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financial intermediation with credit and liquidity frictions. The precautionary liquidity shock is shown to work through two …This paper identifies a precautionary banking liquidity shock via a set of sign, zero and forecast variance … restrictions imposed. The shock proxies the reluctance of the banking sector to "lend" to the real economy induced by an exogenous …
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We assess the effects of financial shocks on inflation, and to what extent financial shocks can account for the "missing disinflation" during the Great Recession. We apply a vector autoregressive model to US data and identify financial shocks through sign restrictions. Our main finding is that...
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