The real effects of liquidity shocks in sovereign debt markets: evidence from Italy

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• dc.contributor.author Gazzani, Andreaca
• dc.contributor.author Vicondoa, Alejandroca
• dc.date.accessioned 2016-09-15T12:46:04Z
• dc.date.available 2016-09-15T12:46:04Z
• dc.date.issued 2016-06
• dc.description.abstract This paper provides the first empirical evidence on the macroeconomic effects of liquidity shocks in secondary sovereign debt markets. We consider the Italian case in a VAR analysis by applying different identification strategies: recursive ordering and Proxy-SVAR. Our findings suggest that liquidity is a major driver for indicators of economic activity. A shock to the Bid-Ask Spread induces a strong (15% of the Forecast Error Variance) and persistent (10 months) effect on unemployment and indicators of confidence. Liquidity shocks are transmitted to the real economy through changes in the lending behaviors of banks. On the one hand, an exogenous fall in liquidity induces/na tightening of banks standards, particularly due to the asset and liquidity position of commercial banks. On the other hand, firms report worse credit conditions in terms of higher costs apart from the interest rate. Similar macroeconomic implications hold for Spain, whereas liquidity shocks are not a significant driver for France and Germany.ca
• dc.description.sponsorship The ADEMU Working Paper Series is being supported by the European Commission Horizon 2020 European Union funding for Research & Innovation, grant agreement No 649396.
• dc.format.mimetype application/pdfca
• dc.identifier.uri http://hdl.handle.net/10230/27286
• dc.language.iso engca
• dc.relation.ispartofseries Ademu Working Paper Series;14
• dc.relation.projectID info:eu-repo/grantAgreement/EC/H2020/649396
• dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution License Creative Commons Attribution 4.0 International, which permits unrestricted use, distribution and reproduction in any medium provided that the original work is properlyattributed.ca
• dc.rights Attribution 4.0 Spainca
• dc.rights.accessRights info:eu-repo/semantics/openAccessca
• dc.rights.uri http://creativecommons.org/licenses/by/4.0/es/ca
• dc.subject.keyword Liquidity
• dc.subject.keyword Sovereign debt
• dc.subject.keyword Proxy-SVAR
• dc.subject.keyword Financial shocks
• dc.subject.keyword Macrofinancial linkages
• dc.title The real effects of liquidity shocks in sovereign debt markets: evidence from Italyca
• dc.type info:eu-repo/semantics/workingPaperca
• dc.type.version info:eu-repo/semantics/publishedVersionca