Financial intermediaries in an estimated DSGE model for the United Kingdom
AbstractGertler and Karadi combined financial intermediation and credit policy in a DSGE framework. We estimate their model with UK data using Bayesian techniques. To validate the fit, we evaluate the model’s empirical properties. Then we analyse the transmission mechanism of the shocks, set to produce a downturn. Finally, we examine the empirical importance of nominal, real and financial frictions and of different shocks. We find that banking friction seems to play an important role in explaining the UK business cycle. Moreover, the banking sector shock seems to explain about half of the fall in real GDP in the recent crisis. A credit supply shock seems to account for most of the weakness in bank lending.
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.
Bibliographic InfoPaper provided by Bank of England in its series Bank of England working papers with number 431.
Length: 32 pages
Date of creation: 13 Jul 2011
Date of revision:
Contact details of provider:
Postal: Publications Group Bank of England Threadneedle Street London EC2R 8AH
Phone: +44 (0)171 601 4030
Fax: +44 (0)171 601 5196
Web page: http://www.bankofengland.co.uk/
More information through EDIRC
Financial friction; DSGE; Bayesian estimation;
Find related papers by JEL classification:
- C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
This paper has been announced in the following NEP Reports:
- NEP-ALL-2012-04-03 (All new papers)
- NEP-BAN-2012-04-03 (Banking)
- NEP-CBA-2012-04-03 (Central Banking)
- NEP-DGE-2012-04-03 (Dynamic General Equilibrium)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Adolfson, Malin & Laseen, Stefan & Linde, Jesper & Villani, Mattias, 2007.
"Bayesian estimation of an open economy DSGE model with incomplete pass-through,"
Journal of International Economics,
Elsevier, vol. 72(2), pages 481-511, July.
- Adolfson, Malin & Laséen, Stefan & Lindé, Jesper & Villani, Mattias, 2005. "Bayesian Estimation of an Open Economy DSGE Model with Incomplete Pass-Through," Working Paper Series 179, Sveriges Riksbank (Central Bank of Sweden).
- Yunus Aksoy & Henrique S. Basso & Javier Coto-Martinez, 2013.
"Lending Relationships And Monetary Policy,"
Western Economic Association International, vol. 51(1), pages 368-393, 01.
- Yunus Aksoy & Henrique S. Basso & Javier Coto-Martinez, 2009. "Lending Relationships and Monetary Policy," Birkbeck Working Papers in Economics and Finance 0912, Birkbeck, Department of Economics, Mathematics & Statistics.
- Henrique S. Basso and Javier Coto-Martinez, Yunus Aksoy,, 2010. "Lending Relationships and Monetary Policy," Working Paper Series 2009:18, Uppsala University, Department of Economics, revised 21 Jan 2010.
- Luca Benati, 2003.
"Evolving Post-World War II U.K. Economic Performance,"
Computing in Economics and Finance 2003
171, Society for Computational Economics.
- Luca Benati, 2004. "Evolving post-World War II UK economic performance," Bank of England working papers 232, Bank of England.
- Meh, Césaire A. & Moran, Kevin, 2010.
"The role of bank capital in the propagation of shocks,"
Journal of Economic Dynamics and Control,
Elsevier, vol. 34(3), pages 555-576, March.
- Césaire Meh & Kevin Moran, 2008. "The Role of Bank Capital in the Propagation of Shocks," Working Papers 08-36, Bank of Canada.
- Chadha, J.S. & Corrado, L. & Sun, Q., 2008.
"Money, Prices and Liquidity Effects: Separating Demand from Supply,"
Cambridge Working Papers in Economics
0855, Faculty of Economics, University of Cambridge.
- Jagjit S. Chadha & Luisa Corrado & Qi Sun, 2008. "Money, Prices and Liquidity Effects: Separating Demand from Supply," Studies in Economics 0817, Department of Economics, University of Kent.
- Harrison, Richard & Oomen, Özlem, 2010. "Evaluating and estimating a DSGE model for the United Kingdom," Bank of England working papers 380, Bank of England.
- Riccardo DiCecio & Edward Nelson, 2007.
"An estimated DSGE model for the United Kingdom,"
Federal Reserve Bank of St. Louis, issue Jul, pages 215-232.
- Luca Sala & Antonella Trigari & Mark Gertler, 2007.
"An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining,"
2007 Meeting Papers
353, Society for Economic Dynamics.
- Mark Gertler & Luca Sala & Antonella Trigari, 2008. "An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 40(8), pages 1713-1764, December.
- Mark Gertler & Luca Sala & Antonella Trigari, 2008. "An Estimated Monetary DSGE Model with Unemployment and Staggered Nominal Wage Bargaining," Working Papers 341, IGIER (Innocenzo Gasparini Institute for Economic Research), Bocconi University.
- Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010.
"Credit and banking in a DSGE model of the euro area,"
Temi di discussione (Economic working papers)
740, Bank of Italy, Economic Research and International Relations Area.
- Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010. "Credit and Banking in a DSGE Model of the Euro Area," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 42(s1), pages 107-141, 09.
- Bean, Charles & Larsen, Jens D. J. & Nikolov, Kalin, 2002. "Financial frictions and the monetary transmission mechanism: theory, evidence and policy implications," Working Paper Series 0113, European Central Bank.
- David Aikman & Matthias Paustian, 2006. "Bank capital, asset prices and monetary policy," Bank of England working papers 305, Bank of England.
- Gertler, Mark & Karadi, Peter, 2011. "A model of unconventional monetary policy," Journal of Monetary Economics, Elsevier, vol. 58(1), pages 17-34, January.
- Giovanni MELINA & Stefania VILLA, 2012.
"Fiscal policy and lending relationships,"
Center for Economic Studies - Discussion papers
ces12.06, Katholieke Universiteit Leuven, Centrum voor Economische Studiën.
- Melina, Giovanni & Villa, Stefania, 2012. "Fiscal policy and lending relationships," Open Access publications from Katholieke Universiteit Leuven urn:hdl:123456789/348272, Katholieke Universiteit Leuven.
- Giovanni Melina & Stefania Villa, 2011. "Fiscal Policy and Lending Relationships," Birkbeck Working Papers in Economics and Finance 1103, Birkbeck, Department of Economics, Mathematics & Statistics.
- Giovanni Melina & Stefania Villa, 2013. "Fiscal Policy and Lending Relationships," IMF Working Papers 13/141, International Monetary Fund.
- Villa, Stefania, 2013. "Financial frictions in the euro area: a Bayesian assessment," Working Paper Series 1521, European Central Bank.
- Burgess, Stephen & Fernandez-Corugedo, Emilio & Groth, Charlotta & Harrison, Richard & Monti, Francesca & Theodoridis, Konstantinos & Waldron, Matt, 2013. "The Bank of England's forecasting platform: COMPASS, MAPS, EASE and the suite of models," Bank of England working papers 471, Bank of England.
- PIROVANO, Mara, 2013. "International financial integration, credit frictions and exchange rate regimes," Working Papers 2013015, University of Antwerp, Faculty of Applied Economics.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Publications Team).
If references are entirely missing, you can add them using this form.