How Important are Financial Frictions in the United States and the Euro Area?
AbstractThis paper aims to evaluate whether frictions in credit markets are important for business cycles in the United States and the euro area. I modify the DSGE financial accelerator model developed by Bernanke, Gertler and Gilchrist (1999) by adding such frictions as price indexation to past inflation, sticky wages, consumption habits and variable capital utilization. When estimating the model using Bayesian methods, I find that financial frictions are relevant in both areas. According to the posterior odds ratio, the data clearly favor the model with financial frictions, both in the United States and the euro area. Moreover, financial frictions are larger in the euro area. Copyright � The editors of the "Scandinavian Journal of Economics" 2009. .
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
Bibliographic InfoArticle provided by Wiley Blackwell in its journal Scandinavian Journal of Economics.
Volume (Year): 111 (2009)
Issue (Month): 3 (09)
Contact details of provider:
Web page: http://onlinelibrary.wiley.com/journal/10.1111/(ISSN)1467-9442
You can help add them by filling out this form.
CitEc Project, subscribe to its RSS feed for this item.
- Ali Dib, 2010. "Banks, Credit Market Frictions, and Business Cycles," Working Papers 10-24, Bank of Canada.
- Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2011.
"Introducing financial frictions and unemployment into a small open economy model,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 35(12), pages 1999-2041.
- Christiano, Lawrence J. & Trabandt, Mathias & Walentin, Karl, 2007. "Introducing Financial Frictions and Unemployment into a Small Open Economy Model," Working Paper Series 214, Sveriges Riksbank (Central Bank of Sweden), revised 01 Jun 2011.
- Mathias Trabandt & Karl Walentin & Lawrence J. Christiano, 2008. "Introducing Financial Frictions and Unemployment into a Small Open Economy Model," 2008 Meeting Papers 423, Society for Economic Dynamics.
- Lawrence J. Christiano & Mathias Trabandt & Karl Walentin, 2010. "Introducing financial frictions and unemployment into a small open economy model," CQER Working Paper 2010-04, Federal Reserve Bank of Atlanta.
- Ali Dib, 2010. "Capital Requirement and Financial Frictions in Banking: Macroeconomic Implications," Working Papers 10-26, Bank of Canada.
- Andrés Fernández Martín & Adam Gulan, 2012.
"Interest Rates and Business Cycles in Emerging Economies: The Role of Financial Frictions,"
77984, Inter-American Development Bank.
- Fernández, Andrés & Gulan, Adam, 2012. "Interest rates and business cycles in emerging economies: The role of financial frictions," Research Discussion Papers 23/2012, Bank of Finland.
- Adam Gulan & Andres Fernandez, 2012. "Interest Rates and Business Cycles in Emerging Economies.The Role of Financial Frictions," 2012 Meeting Papers 849, Society for Economic Dynamics.
- Villa, Stefania, 2013. "Financial frictions in the euro area: a Bayesian assessment," Working Paper Series 1521, European Central Bank.
- Yahong Zhang, 2011. "Financial Frictions, Financial Shocks and Labour Market Fluctuations in Canada," Discussion Papers 11-10, Bank of Canada.
- Michal Brzoza-Brzezina & Marcin Kolasa, 2013.
"Bayesian evaluation of DSGE models with financial frictions,"
71, Department of Applied Econometrics, Warsaw School of Economics.
- Michał Brzoza‐Brzezina & Marcin Kolasa, 2013. "Bayesian Evaluation of DSGE Models with Financial Frictions," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 45(8), pages 1451-1476, December.
- Michał Brzoza-Brzezina & Marcin Kolasa, 2012. "Bayesian evaluation of DSGE models with financial frictions," National Bank of Poland Working Papers 109, National Bank of Poland, Economic Institute.
- David Jacobs & Vanessa Rayner, 2012. "The Role of Credit Supply in the Australian Economy," RBA Research Discussion Papers rdp2012-02, Reserve Bank of Australia.
- Merola, Rossana, 2014.
"The role of financial frictions during the crisis: an estimated DSGE model,"
Dynare Working Papers
- Rossana Merola, 2013. "The role of financial frictions during the crisis: An estimated DSGE model," Working Paper Research 249, National Bank of Belgium.
- Luik, Marc-André & Wesselbaum, Dennis, 2014. "Bubbles over the U.S. business cycle: A macroeconometric approach," Journal of Macroeconomics, Elsevier, vol. 40(C), pages 27-41.
- Yahong Zhang, 2011. "Financial Factors and Labour Market Fluctuations," Working Papers 11-12, Bank of Canada.
- Haddow, Abigail & Mileva, Mariya, 2013. "Financial factors and the international transmission mechanism," Bank of England working papers 479, Bank of England.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Wiley-Blackwell Digital Licensing) or (Christopher F. Baum).
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.