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Conventional VAR and non-VAR methods of identifying the effects of monetary policy shocks on the economy have found a negative output response to monetary tightening using U.S. data over the 1960s-1990s. However, we show that these methods fail to find this contractionary effect when the sample is restricted to the period since the 1980s, apparently due to changes in the policymaking environment that reduce their effectiveness. Identifying policy shocks using Fed Funds futures data, we recover the contractionary effect of monetary tightening on output and find that almost half of output variation over the period appears due to policy shocks.

Banks and Banking --- Econometrics --- Investments: Futures --- Industries: General --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- Monetary Policy --- Contingent Pricing --- Futures Pricing --- option pricing --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Interest Rates: Determination, Term Structure, and Effects --- Macroeconomics: Production --- Econometrics & economic statistics --- Finance --- Banking --- Vector autoregression --- Futures --- Central bank policy rate --- Structural vector autoregression --- Industrial production --- Econometric analysis --- Financial institutions --- Financial services --- Production --- Derivative securities --- Interest rates --- Industries --- United States --- Monetary policy. --- Economic policy. --- Option pricing

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The Crisis and Miss Emily's Perceptions draws an analogy between the theme and the characters in Faulkner's short story "A Rose for Emily" and the global financial crisis. In Faulkner's story, all the characters try to deny realities, thus allowing an unstable situation to last longer than it should have. The paper briefly reviews the literature on perception biases and argues that all economic actors have, to some degree, been refusing to face realities, which helped the crisis to unfold.

Econometrics --- Infrastructure --- Macroeconomics --- Industries: Financial Services --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Financial Institutions and Services: General --- Pension Funds --- Non-bank Financial Institutions --- Financial Instruments --- Institutional Investors --- Economic Development: Urban, Rural, Regional, and Transportation Analysis --- Housing --- Labor Economics: General --- Econometrics & economic statistics --- Finance --- Labour --- income economics --- Vector autoregression --- Financial sector --- Hedge funds --- Labor --- Econometric analysis --- Economic sectors --- Financial institutions --- National accounts --- Financial services industry --- Saving and investment --- Labor economics --- United States --- Income economics

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This paper investigates Central America's external linkages over the last fifteen years of increased integration in light of the 2008-09 global recession. Using structural VAR models, it is found that a one percent shock to U.S. growth shifts economic activity in Central America by 0.7 to 1 percent, on average. Spillovers from global shocks and the rest of the region also affect activity in some countries. Spillovers are mostly transmitted through advanced country financial conditions and fluctuations in external demand for Central American exports. Shocks to advanced economies associated with the 2008-09 financial crisis lowered economic activity in the region by 4 to 5 percent, on average, accounting for a majority of the observed slowdown. The impact was almost twice as large as elasticities estimated on pre-crisis data would have predicted. These results underscore the importance of operating credible policy frameworks that enable a countercyclical policy response to external shocks.

Global Financial Crisis, 2008-2009. --- Business cycles --- Economic cycles --- Economic fluctuations --- Cycles --- Global Economic Crisis, 2008-2009 --- Subprime Mortgage Crisis, 2008-2009 --- Financial crises --- Econometrics --- Exports and Imports --- Financial Risk Management --- Macroeconomics --- Externalities --- Remittances --- Financial Crises --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- State Space Models --- International economics --- Economic & financial crises & disasters --- Economic growth --- Econometrics & economic statistics --- Spillovers --- Structural vector autoregression --- International finance --- United States

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This paper examines the importance of credit market shocks in driving global business cycles over the period 1988:1-2009:4. We first estimate common components in various macroeconomic and financial variables of the G-7 countries. We then evaluate the role played by credit market shocks using a series of VAR models. Our findings suggest that these shocks have been influential in driving global activity during the latest global recession. Credit shocks originating in the United States also have a significant impact on the evolution of world growth during global recessions.

Credit. --- Financial crises. --- Crashes, Financial --- Crises, Financial --- Financial crashes --- Financial panics --- Panics (Finance) --- Stock exchange crashes --- Stock market panics --- Crises --- Borrowing --- Finance --- Money --- Loans --- Econometrics --- Inflation --- Macroeconomics --- Money and Monetary Policy --- Production and Operations Management --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- Macroeconomics: Production --- Prices, Business Fluctuations, and Cycles: General (includes Measurement and Data) --- Price Level --- Deflation --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Monetary economics --- Economic growth --- Econometrics & economic statistics --- Credit --- Productivity --- Business cycles --- Vector autoregression --- Industrial productivity --- Prices --- United States

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This paper presents a modeling framework that delivers joint forecasts of indicators of systemic real risk and systemic financial risk, as well as stress-tests of these indicators as impulse responses to structural shocks identified by standard macroeconomic and banking theory. This framework is implemented using large sets of quarterly time series of indicators of financial and real activity for the G-7 economies for the 1980Q1-2009Q3 period. We obtain two main results. First, there is evidence of out-of sample forecasting power for tail risk realizations of real activity for several countries, suggesting the usefulness of the model as a risk monitoring tool. Second, in all countries aggregate demand shocks are the main drivers of the real cycle, and bank credit demand shocks are the main drivers of the bank lending cycle. These results challenge the common wisdom that constraints in the aggregate supply of credit have been a key driver of the sharp downturn in real activity experienced by the G-7 economies in 2008Q4- 2009Q1.

Banks and Banking --- Finance: General --- Inflation --- Money and Monetary Policy --- Industries: Financial Services --- Econometrics --- Monetary Policy, Central Banking, and the Supply of Money and Credit: General --- General Financial Markets: Government Policy and Regulation --- Banks --- Depository Institutions --- Micro Finance Institutions --- Mortgages --- Price Level --- Deflation --- Time-Series Models --- Dynamic Quantile Regressions --- Dynamic Treatment Effect Models --- Diffusion Processes --- Finance --- Monetary economics --- Banking --- Macroeconomics --- Econometrics & economic statistics --- Bank credit --- Systemic risk --- Loans --- Financial sector policy and analysis --- Money --- Financial institutions --- Prices --- Vector autoregression --- Econometric analysis --- Credit --- Financial risk management --- Banks and banking --- United States --- Risk. --- Macroeconomics.