Financial frictions and the real economy
Mario Pietrunti ()
No 41, ESRB Working Paper Series from European Systemic Risk Board
This paper investigates in a non-linear setting the impact on the real economy of frictions stemming from the financial sector. We develop a medium scale DSGE model with a banking sector where an occasionally binding constraint on banks’ capital induces a relevant non-linearity. The model - estimated on Italian data from 1999 to 2015 via a likelihood-free method - is able to generate business cycle asymmetries as in actual data that cannot replicated by linear models. Lastly, the role of macroprudential policies in smoothing the cycle is discussed JEL Classification: C15, E32, E44, G01
Keywords: financial frictions; likelihood-free estimation; non-linear DSGE Models (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:srk:srkwps:201741
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