Financial Frictions and Sources of Business Cycle
IMF Working Papers, October 23, 2014
Source details
- Canonical URL
- Financial Frictions and Sources of Business Cycle
Other formats
Bibliographic details
- Authors: Marzie Taheri Sanjani
- Published: October 23, 2014
- Series: IMF Working Papers
- DOI: https://doi.org/10.5089/9781498347792.001
Overview
- Author: Marzie Taheri Sanjani
- Publication date: October 23, 2014
- Paper type: IMF Working Paper (Working Paper No. 2014/194)
- Core objective: Estimate a New Keynesian DSGE model with an explicit financial intermediary sector to assess the role of financial stress in business-cycle dynamics.
Model and Methodology
- Model framework: New Keynesian DSGE with an explicit financial intermediary sector and measures of financial stress.
- Key feature: Incorporates measures of financial stress such as the spread between lending and borrowing to capture the impact of the financial crisis more directly and efficiently.
Key findings
- The model fits US post-war macroeconomic data well.
- Financial shocks play a greater role in explaining the volatility of macroeconomic variables than marginal efficiency of investment (MEI) shocks.
- Including the spread between lending and borrowing improves the model’s ability to capture crisis dynamics.
Subjects and keywords
- Subjects: Business cycles, Economic growth, Economic theory, Financial crises, Financial frictions, Financial institutions, Labor, Nonbank financial institutions
- Keywords (as listed): Bayesian Estimation, Business cycles, capital accumulation dynamic, capital producer firm, depreciation rate, DSGE, equity capital, Financial Frictions, Global, inflation rate, interest rate, investment shock, Nonbank financial institutions, producer firm, quality shock, representative capital producer sector, Sources of Business Cycle, WP