By Sara Diressova, Princeton University
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Di Tella and Kurlat (2017) and Drechser et al. (2017a) study the effects of a nominal interest rate shock on various bank balance sheet variables. I study the same relationships using a VAR model, to understand them over multiple periods of time, without assumptions of exogeneity, and with clear interactions between variables through impulse response functions (Hamilton 1994). I find that … Continue reading Vector Autoregressive Modeling of Interest Rate Shocks on Bank Balance Sheets: A Comparative Study