An estimated financial accelerator model for small-open African economies

Mutiu Gbade Rasaki and Christopher Malikane

MPRA Paper from University Library of Munich, Germany

Abstract: The paper formulates and estimates an open economy monetary DSGE model to investigate the quantitative significance of the financial accelerator mechanism in business cycle fluctuations for African countries. We employ the Bayesian technique to evaluate the statistical importance of the financial accelerator channel in African countries. We compare the model with financial accelerator model to the model without financial accelerator. The estimation shows that financial accelerator channels are empirically important in African economies. The marginal likelihood results clearly favour the model with financial accelerator in African economies. Moreover, the results show that the financial accelerator channel dampens the expansionary effects of exchange rate depreciation in African economies. African countries should deepen their domestic debt markets to minimize their vulnerability to exchange rate shocks.

Keywords: Financial accelerator; Bayesian technique; Marginal likelihood; Business cycle. (search for similar items in EconPapers)
JEL-codes: C11 E32 F41 (search for similar items in EconPapers)
Date: 2017-11-17
New Economics Papers: this item is included in nep-dge, nep-mac, nep-opm and nep-ore
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:95977

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