Transmission of Financial Stress Shocks between the USA and the Euro Area During Different Business Cycle Phases

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dc.contributor.authorDajčman, Silvo
dc.contributor.authorKavkler, Alenka
dc.contributor.authorMikek, Peter
dc.contributor.authorRomih, Dejan
dc.contributor.otherEkonomická fakultacs
dc.date.accessioned2020-11-25T08:54:55Z
dc.date.available2020-11-25T08:54:55Z
dc.description.abstractThis 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.en
dc.formattext
dc.identifier.doi10.15240/tul/001/2020-4-010
dc.identifier.eissn2336-5604
dc.identifier.issn1212-3609
dc.identifier.urihttps://dspace.tul.cz/handle/15240/158179
dc.language.isoen
dc.publisherTechnická Univerzita v Libercics
dc.publisherTechnical university of Liberec, Czech Republicen
dc.publisher.abbreviationTUL
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dc.relation.ispartofEkonomie a Managementcs
dc.relation.ispartofEconomics and Managementen
dc.relation.isrefereedtrue
dc.rightsCC BY-NC
dc.subjectfinancial stressen
dc.subjectinternational transmission of financial stressen
dc.subjectbusiness and financial cyclesen
dc.subjectnonlinearityen
dc.subjectthreshold VARen
dc.subject.classificationE32
dc.subject.classificationE44
dc.subject.classificationG01
dc.titleTransmission of Financial Stress Shocks between the USA and the Euro Area During Different Business Cycle Phasesen
dc.typeArticleen
local.accessopen
local.citation.epage165
local.citation.spage152
local.facultyFaculty of Economics
local.filenameEM_4_2020_10
local.fulltextyes
local.relation.abbreviationE+Mcs
local.relation.abbreviationE&Men
local.relation.issue4
local.relation.volume23
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