An estimated DSGE model with search and matching frictions in the credit market

Danilo Liberati

International Journal of Monetary Economics and Finance, 2018, vol. 11, issue 6, 567-617

Abstract: Financial frictions have become fundamental for studying the business cycle and credit market dynamics. This work adds to the existing literature by introducing a search and matching scheme in the financial market into a cash in advance New Keynesian DSGE theoretical model. We provide an alternative explanation of the degree of incompleteness in the pass-through from policy rate to loan rates depending on credit market tightness, the search costs sustained by banks, and the relative powers of the agents in loan interest rate bargaining. The model is able to reproduce the countercyclical behaviour of the credit spread with respect to a positive technology shock. It also proposes a scenario in which a credit shock hits the economy. The model is estimated by using the Bayesian procedures.

Keywords: interest rate pass-through; credit spread; search and matching; credit market frictions; Bayesian techniques. (search for similar items in EconPapers)
Date: 2018
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Citations: View citations in EconPapers (2)

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Working Paper: An estimated DSGE model with search and matching frictions in the credit market (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:ids:ijmefi:v:11:y:2018:i:6:p:567-617

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