Uncertainty shocks, banking frictions and economic activity

Dario Bonciani and Björn van Roye

Journal of Economic Dynamics and Control, 2016, vol. 73, issue C, 200-219

Abstract: In this paper we investigate the effects of uncertainty shocks on economic activity in the euro area by using a Dynamic Stochastic General Equilibrium (DSGE) model with heterogenous agents and a stylized banking sector. We show that frictions in credit supply amplify the effects of uncertainty shocks on economic activity. This amplification channel stems mainly from the stickiness in bank loan rates. This stickiness reduces the effectiveness in the transmission mechanism of monetary policy.

Keywords: Uncertainty Shocks; Financial frictions; Stochastic Volatility; Perturbation Methods; Third-order approximation (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (66)

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0165188916301506
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Uncertainty shocks, banking frictions and economic activity (2015)
Working Paper: Uncertainty shocks, banking frictions, and economic activity (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:73:y:2016:i:c:p:200-219

DOI: 10.1016/j.jedc.2016.09.008

Access Statistics for this article

Journal of Economic Dynamics and Control is currently edited by J. Bullard, C. Chiarella, H. Dawid, C. H. Hommes, P. Klein and C. Otrok

More articles in Journal of Economic Dynamics and Control from Elsevier
Bibliographic data for series maintained by Catherine Liu ().