Uncertainty shocks, banking frictions, and economic activity
Dario Bonciani () and
Björn van Roye
No 1843, Kiel Working Papers from Kiel Institute for the World Economy (IfW)
In this paper we investigate the effects of uncertainty shocks on economic activity using a Dynamic Stochastic General Equilibrium (DSGE) model with heterogenous agents and a stylized banking sector. We show that frictions in credit supply amplify the effects of uncertainty shocks on economic activity. This amplification channel stems mainly from the stickiness in banking retail interest rates. This stickiness reduces the effectiveness in the transmission mechanism of monetary policy.
Keywords: Uncertainty Shocks; Financial frictions; Monetary Policy; Stochastic Volatility; Perturbation Methods; Third-order approximation (search for similar items in EconPapers)
JEL-codes: E32 E52 (search for similar items in EconPapers)
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Journal Article: Uncertainty shocks, banking frictions and economic activity (2016)
Working Paper: Uncertainty shocks, banking frictions and economic activity (2015)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:ifwkwp:1843
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