scholarly journals Bayesian Evaluation of DSGE Models with Financial Frictions

2013 ◽  
Vol 45 (8) ◽  
pp. 1451-1476 ◽  
Author(s):  
MICHAŁ BRZOZA-BRZEZINA ◽  
MARCIN KOLASA
Keyword(s):  
Financial Frictions ◽  
Dsge Models

scholarly journals The Anatomy of Standard DSGE Models with Financial Frictions

2011 ◽  
Author(s):  
Michal Brzoza-Brzezina ◽  
Marcin Kolasa ◽  
Krzysztof Makarski
Keyword(s):  
Financial Frictions ◽  
Dsge Models

scholarly journals The anatomy of standard DSGE models with financial frictions

2013 ◽  
Vol 37 (1) ◽  
pp. 32-51 ◽  
Author(s):  
Michał Brzoza-Brzezina ◽  
Marcin Kolasa ◽  
Krzysztof Makarski
Keyword(s):  
Financial Frictions ◽  
Dsge Models

Forecasting using DSGE models with financial frictions

2015 ◽  
Vol 31 (1) ◽  
pp. 1-19 ◽  
Author(s):  
Marcin Kolasa ◽  
Michał Rubaszek
Keyword(s):  
Financial Frictions ◽  
Dsge Models

scholarly journals Financial Sector’s Role in Transmission of Monetary and Fiscal Shocks in Russian Economy: Estimation Under Different Assumptions About Production Sector

2021 ◽  
Vol 13 (6) ◽  
pp. 25-53
Author(s):  
S.S. Lazaryan ◽  
◽  
M.A. Elkina ◽  
Keyword(s):  
Developing Economies ◽  
Financial Frictions ◽  
Policy Instruments ◽  
Financial Sector ◽  
Dsge Models ◽  
Production Sector ◽  
Sector Model ◽  
Russian Economy ◽  
Fiscal Shocks

The financial sector plays a crucial role in the economy, not only being a simple intermediary between creditors and borrowers, but also having a significant impact on the economy’s development and its various characteristics. For this reason, accounting for financial sector peculiarities is critical when developing policy-oriented general equilibrium models for practical use. This drives the interest of many researchers in development of approaches to describing the financial sector and financial frictions in DSGE models. In financial frictions models one can describe the production side of the economy in a simplistic way. However, it could be important to model the production sector in more detail. For instance, separating tradable and non-tradable sectors of the economy could be of great significance, especially for developing economies which depend on foreign trade a lot. In this paper we analyze the role of the financial sector and how important it is for transmission of monetary and fiscal shocks under different assumptions about the production sector. Namely, we compare two-sector economy with tradable and non-tradable sectors with a simplistic model which assumes that the economy produces only tradable goods. According to the results, financial frictions impact tradable and nontradable sectors asymmetrically. In the two-sector model the effect of financial frictions is quantitatively smaller than in the one-sector economy. Therefore, using the latter simplifying assumption could lead to overestimating the role of financial frictions in the transmission of monetary and fiscal shocks. In addition, the paper provides estimates of how changes in monetary and fiscal policy instruments impact the Russian economy given the existence of financial frictions.

scholarly journals Financial frictions and durable goods in DSGE models with sticky prices

2021 ◽  
Author(s):  
Ugochi Emenogu
Keyword(s):  
Monetary Policy ◽  
Durable Goods ◽  
Financial Frictions ◽  
House Prices ◽  
Sticky Prices ◽  
Dsge Models ◽  
Monetary Policy Shocks ◽  
Policy Shocks ◽  
Policy Measures ◽  
Prudential Policy

The focus of this dissertation is to study the role of financial frictions in DSGE models with durable goods and sticky prices, and how key economic variables respond in such an environment to monetary policy shocks. The first chapter studies the empirical evidence regarding the response of durable and non-durable goods to monetary policy shocks. Using quarterly data from Canada and the United States, and a vector autoregressive (VAR) model, we trace out empirically the effects of monetary policy innovations on key macroeconomic variables. We find that in response to an increase in the interest rate, durable consumption, non-durable consumption, output, and household debt decrease, and the nominal interest rate rises. In the second chapter, we show that in the presence of agency costs and equity based borrowing, the two sector sticky price model with collateral frictions resolve the co-movement problem in a way which is consistent with the empirical evidence, even when durable prices are nearly exible. In the third chapter, we examine the effect of financial frictions on the consumption of durables and non-durables in a two-sector DSGE model with sticky prices and heterogeneous agents. The financial frictions are a combination of loan-to-value (LTV) and payment-to-income (PTI) constraints faced by borrowers. In this setting a monetary contraction reduces the maximum amount that consumer that consumers can borrow in order to purchase durable goods. As a result, the model predicts that the consumption of durables falls, along with non-durables even when durable prices are fully flexible. Thus, the model matches better the predictions of the model with the data, relative to the existing literature. The fourth chapter of the dissertation studies the effectiveness of macro-prudential policy measures in curbing house price inflation amid rising outward foreign direct investment from abroad. To assess the usefulness of these macro-prudential policy tools, we use database of housing prices, GDP, bank crises, policy rates, Chinese outward investment and macro-prudential policy measures covering advanced countries at quarterly frequency from 2003 to 2016. The results suggest that Macro prudential policy measures help in reducing house prices and OFDI has a significant and positive correlation with house prices movements.

scholarly journals Bayesian Evaluation of DSGE Models with Financial Frictions

2012 ◽  
Author(s):  
Michal Brzoza-Brzezina ◽  
Marcin Kolasa
Keyword(s):  
Financial Frictions ◽  
Dsge Models

scholarly journals On Shadow Banking and Financial Frictions in DSGE Modeling

2020 ◽  
Vol 71 (2) ◽  
pp. 101-133
Author(s):  
Philipp Kirchner
Keyword(s):  
Financial Stability ◽  
Financial Frictions ◽  
Explanatory Power ◽  
Banking System ◽  
Dsge Models ◽  
Shadow Banking ◽  
Real Economy ◽  
Dynamic Stochastic ◽  
Shadow Banking System ◽  
The Business Cycle

AbstractAt the forefront of macroeconomic research on the causes of the Great Financial Crisis (GFC) was and still is the usage of dynamic stochastic general equilibrium (DSGE) models. To capture the nonlinearities of the GFC, these models were enriched with a variety of financial frictions. This paper focuses on a special subset of these frictions, the shadow banking system. We provide a structured review of the strand of literature that considers shadow banking in DSGE setups and draw particular attention to the modeling approach as well as impact of shadow banking. Our analysis allows the following conclusions: firstly, models featuring shadow banking are better able to simulate realistic movements in the business cycle that are of comparable magnitude to the GFC. Secondly, the models consider amplification channels between the financial sector and the real economy that proved to be of importance during the crisis. Thirdly, the models display a good explanatory power of financial stability measures in the light of shadow banking.

scholarly journals Forecasting with instabilities: An application to DSGE models with financial frictions

2019 ◽  
Vol 61 ◽  
pp. 103133
Author(s):  
Roberta Cardani ◽  
Alessia Paccagnini ◽  
Stefania Villa
Keyword(s):  
Financial Frictions ◽  
Dsge Models

scholarly journals Inflation in the Great Recession and New Keynesian Models

2015 ◽  
Vol 7 (1) ◽  
pp. 168-196 ◽  
Author(s):  
Marco Del Negro ◽  
Marc P. Giannoni ◽  
Frank Schorfheide
Keyword(s):  
Monetary Policy ◽  
Great Recession ◽  
Economic Activity ◽  
Financial Frictions ◽  
New Keynesian ◽  
Dsge Models ◽  
Dsge Model ◽  
Macroeconomic Variables ◽  
The Great Recession ◽  
New Keynesian Models

Several prominent economists have argued that existing DSGE models cannot properly account for the evolution of key macroeconomic variables during and following the recent Great Recession. We challenge this argument by showing that a standard DSGE model with financial frictions available prior to the recent crisis successfully predicts a sharp contraction in economic activity along with a protracted but relatively modest decline in inflation, following the rise in financial stress in 2008:IV. The model does so even though inflation remains very dependent on the evolution of economic activity and of monetary policy. (JEL E12, E31, E32, E37, E44, E52, G01)

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