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

Naohisa Hirakata, Nao Sudo and Kozo Ueda

Journal of Economic Dynamics and Control, 2011, vol. 35, issue 12, 2042-2063

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% of its variations. In particular, in the Great Recession, they are the key determinants of the investment declines, accounting for 36% of the variations.

Keywords: Monetary policy; Financial accelerators; Financial intermediaries; Chained credit contracts (search for similar items in EconPapers)
JEL-codes: E31 E44 E52 (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (44)

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Working Paper: 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:eee:dyncon:v:35:y:2011:i:12:p:2042-2063

DOI: 10.1016/j.jedc.2011.08.007

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