We analyze the feedback mechanisms between economic downturns and financial stress for several euro area countries. Our study employs newly constructed financial condition indices that incorporate banking variables extensively. We apply a non-linear Vector Smooth Transition Autoregressive...

We analyze the relationship between firm-specific shocks and aggregate fluctuations. In particular, profitability of firms affected by a negative shock worsens. To the extent that the banks cannot distinguish between aggregate and firm-specific profitability shocks, they will adjust interest...

We analyze the relationship between firm-specific shocks and aggregate fluctuations. In particular, profitability of firms affected by a negative shock worsens. To the extent that the banks cannot distinguish between aggregate and firm-specific profitability shocks, they will adjust interest...

We analyze the feedback mechanisms between economic downturns and financial stress for several euro area countries. Our study employs newly constructed financial condition indices that incorporate banking variables extensively. We apply a non-linear Vector Smooth Transition Autoregressive...