A semi-structural model with banking sector for stress testing scenario design

J. Sebastián Becerra, José Carreño and Juan Francisco Martínez

Working Papers Central Bank of Chile from Central Bank of Chile

Abstract: In this paper, we estimate a semi-structural New-Keynesian model for the Chilean economy. Our contribution consists of including a financial block, with an explicit description of the lending interest rate, credit volume, credit risk, and interest rate spreads. Firstly, we find the presence of a financial accelerator, that amplifies shocks. We find a significant relevance of financial sector feedback to the real economy. The incorporation of financial elements in a simple and flexible way allows the developed macro-financial model to be useful for various purposes. In this work, we carry out exercises in which extreme scenarios are simulated and are suitable for stress testing purposes.

Date: 2021-07
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-fdg, nep-isf and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:chb:bcchwp:922

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