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Financial conditions and the risks to economic growth in the United States since 1875
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Coe, Patrick and Vahey, Shaun P. (2020) Financial conditions and the risks to economic growth in the United States since 1875. Working Paper. Australia: Centre for Applied Macroeconomic Analysis. CAMA Working Paper (36/2020).
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Official URL: https://dx.doi.org/10.2139/ssrn.3582337
Abstract
We explore the historical relationship between financial conditions and real economic growth for quarterly U.S. data from 1875 to 2017 with a flexible empirical copula modelling methodology. We compare specifications with both linear and non-linear dependence, and with both Gaussian and non-Gaussian marginal distributions. Our results indicate strong statistical support for models that are both non-Gaussian and nonlinear for our historical data, with considerable heterogeneity across sub-samples. We demonstrate that ignoring the contribution of financial conditions typically understates the conditional downside risks to economic growth in crises. For example, accounting for financial conditions more than doubles the probability of negative growth in the year following the 1929 stock market crash.
Item Type: | Working or Discussion Paper (Working Paper) | ||||
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Subjects: | E History America > E151 United States (General) H Social Sciences > HB Economic Theory H Social Sciences > HC Economic History and Conditions H Social Sciences > HG Finance H Social Sciences > HJ Public Finance H Social Sciences > HN Social history and conditions. Social problems. Social reform |
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Divisions: | Faculty of Social Sciences > Warwick Business School | ||||
Library of Congress Subject Headings (LCSH): | Depressions -- 1929 -- United States, Economic development -- United States -- History, Finance -- United States -- History, United States -- Economic conditions -- 1865-1918, United States -- Economic conditions -- 20th century | ||||
Series Name: | CAMA Working Paper | ||||
Publisher: | Centre for Applied Macroeconomic Analysis | ||||
Place of Publication: | Australia | ||||
ISSN: | 2206-0332 | ||||
Official Date: | 23 April 2020 | ||||
Dates: |
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Number: | 36/2020 | ||||
Number of Pages: | 86 | ||||
Institution: | University of Warwick | ||||
Status: | Not Peer Reviewed | ||||
Publication Status: | Published | ||||
Date of first compliant deposit: | 11 May 2020 | ||||
Date of first compliant Open Access: | 12 May 2020 | ||||
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