Financial intermediation, consumption dynamics, and business cycles
Economic Modelling, 2017, vol. 60, issue C, 231-243
The recent financial crisis highlighted the need to deepen our understanding of the impact of the financial intermediation sector on the real economy. We examine the quantitative implications of financial intermediation and firm's financing frictions in explaining the observed cyclical properties of both real and financial variables. We find that a modified version of the financial intermediation framework of Gertler and Karadi (2011) augmented with financing frictions in production does a good job in matching the unconditional moments of financial fluctuations without compromising key real co-movements. Our results are relevant for macro-prudential policy analysis as they underscore the importance of carefully identifying the sources of aggregate fluctuations in models in which financial intermediaries and financial frictions play a non-trivial role.
Keywords: Financial frictions; Financial accelerator; Endogenous leverage; Labor productivity; Financial intermediation; Business cycles (search for similar items in EconPapers)
JEL-codes: E22 E32 E44 J23 J24 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecmode:v:60:y:2017:i:c:p:231-243
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