Arbeitspapier

Measuring real-financial connectedness in the U.S. economy

We analyze connectedness between the real and financial sectors of the U.S. economy. Using the weekly ADS index of the Philadelphia FED (the widely used business conditions indicator) to represent the real side, we find that during times of financial distress and/or business cycle turning points the direction of connectedness runs from the real sector to financial markets. The ADS index is derived from a model containing a measure of term structure along with real variables, therefore, it might not be the best representative of the real activity to be used in the connectedness analysis. As an alternative, we derive a real activity index (RAI) from a dynamic factor model of the real sector variables only. The behavior of RAI over time is quite similar to that of the ADS index. When we include RAI to represent the real side of the economy in the connectedness analysis, the direction of net connectedness reverses: financial markets generate positive net connectedness to the real side of the economy.

Sprache
Englisch

Erschienen in
Series: Working Paper ; No. 1812

Klassifikation
Wirtschaft
Multiple or Simultaneous Equation Models: Classification Methods; Cluster Analysis; Principal Components; Factor Models
Financial Markets and the Macroeconomy
Prices, Business Fluctuations, and Cycles: Forecasting and Simulation: Models and Applications
General Financial Markets: General (includes Measurement and Data)
Thema
Macro-financial linkages
Connectedness
ADS index
Dynamic factor model
Volatility
Vector autoregression
Variance decomposition

Ereignis
Geistige Schöpfung
(wer)
Uluceviz, Erhan
Yılmaz, Kamil
Ereignis
Veröffentlichung
(wer)
Koç University-TÜSİAD Economic Research Forum (ERF)
(wo)
Istanbul
(wann)
2018

Handle
Letzte Aktualisierung
10.03.2025, 11:44 MEZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Uluceviz, Erhan
  • Yılmaz, Kamil
  • Koç University-TÜSİAD Economic Research Forum (ERF)

Entstanden

  • 2018

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