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Görtz, Christoph; Tsoukalas, John D.; Zanetti, Francesco
American economic journal. Macroeconomics, 10/2022, Volume: 14, Issue: 4Journal Article
We examine the dynamic effects of TFP news shocks in the context of frictions in financial markets. We document two new facts. First, a shock to future TFP generates a significant decline in credit spread indicators along with a robust improvement in credit supply indicators. Second, we establish a tight link between TFP news shocks and shocks that explain the majority of un-forecastable movements in credit spread indicators. A DSGE model enriched with a financial sector of the Gertler-Kiyotaki-Karadi type generates very similar quantitative dynamics. (JEL E12, E31, E32, E44, G12, G21)
