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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
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Working Paper: Uncertainty shocks, banking frictions and economic activity (2015) Downloads
Working Paper: Uncertainty shocks, banking frictions, and economic activity (2013) Downloads
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Persistent link: https://EconPapers.repec.org/RePEc:eee:dyncon:v:73:y:2016:i:c:p:200-219

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