Bayesian evaluation of DSGE models with financial frictions
Michal Brzoza-Brzezina and
Marcin Kolasa ()
No 109, NBP Working Papers from Narodowy Bank Polski, Economic Research Department
We evaluate two most popular approaches to implementing financial frictions into DSGE models: the Bernanke et al. (1999) setup, where financial frictions enter through the price of loans, and the Kiyotaki and Moore (1997) model, where they concern the quantity of loans. We take both models to the US data and check how well they fit it on several margins. Overall, comparing the models favors the framework of Bernanke et al. (1999). However, even this model is not able to make a clear improvement over the benchmark New Keynesian model, and the Kiyotaki and Moore (1997) underperforms it on several margins. Furthermore, none of the extensions explains the 2007-09 recession as significantly more “financial” than several previous ones.
Keywords: financial frictions; DSGE models; DSGE-VAR; Bayesian analysis (search for similar items in EconPapers)
JEL-codes: E30 E44 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-mac
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Journal Article: Bayesian Evaluation of DSGE Models with Financial Frictions (2013)
Working Paper: Bayesian evaluation of DSGE models with financial frictions (2013)
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Persistent link: https://EconPapers.repec.org/RePEc:nbp:nbpmis:109
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