Dynamic Effects of Financial Intermediation over the Business Cycle.

This paper provides a empirical evidence that the financial intermediation disturbances can generate business cycles. We examine three countries whose financial sectors are fully developed but quite distinct in their institutional and regulatory circumstances; thus, we can infer whether financial intermediation disturbances differ across dissimilar financial environments. We find that the dynamic responses of output to financial intermediation shocks exhibit similar patterns in all cases studied. However, the various institutional and regulatory circumstances have generated different propagation mechanisms transmitting the financial disturbance to output in ways that lead the magnitudes of the responses to deviate across economies. Copyright 2000 by Oxford University Press.