Do banking shocks matter for the U.S. economy?

Naohisa Hirakata, Nao Sudo and Kozo Ueda

No 86, Globalization Institute Working Papers from Federal Reserve Bank of Dallas

Abstract: The quantitative significance of shocks to the financial intermediary (FI) has not received much attention up to now. We estimate a DSGE model with what we describe as chained credit contracts, using Bayesian technique. In the model, credit-constrained FIs intermediate funds from investors to credit-constrained entrepreneurs through two types of credit contract. We find that the shocks to the FIs' net worth play an important role in the investment dynamics, accounting for 17 percent of its variations. In particular, in the Great Recession, they are the key determinants of the investment declines, accounting for 36 percent of the variations.

JEL-codes: E31 E44 E52 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2011
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac and nep-mon
Note: Published as: Hirakata, Naohisa, Nao Sudo and Kozo Ueda (2011), "Do Banking Shocks Matter for the U.S. Economy?" Journal of International Economic Dynamics and Control 35 (12): 2042-2063.
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Citations: View citations in EconPapers (40)

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Journal Article: Do banking shocks matter for the U.S. economy? (2011)
Working Paper: Do Banking Shocks Matter for the U.S. Economy? (2010)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:feddgw:86

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