The role of financial frictions during the crisis: An estimated DSGE model

Rossana Merola

Economic Modelling, 2015, vol. 48, issue C, 70-82

Abstract: After the recent banking crisis in 2008, financial market conditions have turned out to be a relevant factor for economic fluctuations. This paper provides a quantitative assessment of the impact of financial frictions on the U.S. business cycle. The analysis compares the original Smets and Wouters model (2003, 2007) with an alternative version augmented with the financial accelerator mechanism á la Bernanke, Gertler and Gilchrist (1996, 1999). Both versions are estimated using Bayesian techniques over a sample extended to 2012. The analysis supports the role of financial channels, namely the financial accelerator mechanism, in transmitting dysfunctions from financial markets to the real economy.

Keywords: DSGE models; Business cycle; Financial frictions; Bayesian estimation (search for similar items in EconPapers)
Date: 2015
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Citations: View citations in EconPapers (28)

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Related works:
Working Paper: The role of financial frictions during the crisis: an estimated DSGE model (2014)
Working Paper: The role of financial frictions during the crisis: An estimated DSGE model (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:48:y:2015:i:c:p:70-82

DOI: 10.1016/j.econmod.2014.10.037

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