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Monetary Policy in an Estimated DSGE Model with a Financial Accelerator

Ian Christensen () and Ali Dib

Staff Working Papers from Bank of Canada

Abstract: The authors estimate a sticky-price dynamic stochastic general-equilibrium model with a financial accelerator, à la Bernanke, Gertler, and Gilchrist (1999), to assess the importance of financial frictions in the amplification and propagation of the effects of transitory shocks. Structural parameters of two models, one with and one without a financial accelerator, are estimated using a maximum-likelihood procedure and post-1979 U.S. data. The estimation and simulation results provide some quantitative evidence in favour of the financial-accelerator model. The financial accelerator appears to play an important role in investment fluctuations, but its importance for output depends on the nature of the initial shock.

Keywords: Business fluctuations and cycles; Economic models; Econometric and statistical methods (search for similar items in EconPapers)
JEL-codes: E32 E37 E44 (search for similar items in EconPapers)
Pages: 45 pages
Date: 2006
New Economics Papers: this item is included in nep-cba and nep-dge
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Persistent link: https://EconPapers.repec.org/RePEc:bca:bocawp:06-9

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