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A semi-structural model with banking sector for stress testing scenario design

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  • J. Sebastián Becerra
  • José Carreño
  • Juan Francisco Martínez

Abstract

In this paper, we estimate a semi-structural New-Keynesian model for the Chilean economy. Our contribution consists of including a financial block, with an explicit description of the lending interest rate, credit volume, credit risk, and interest rate spreads. Firstly, we find the presence of a financial accelerator, that amplifies shocks. We find a significant relevance of financial sector feedback to the real economy. The incorporation of financial elements in a simple and flexible way allows the developed macro-financial model to be useful for various purposes. In this work, we carry out exercises in which extreme scenarios are simulated and are suitable for stress testing purposes.

Suggested Citation

  • J. Sebastián Becerra & José Carreño & Juan Francisco Martínez, 2021. "A semi-structural model with banking sector for stress testing scenario design," Working Papers Central Bank of Chile 922, Central Bank of Chile.
    • Handle: RePEc:chb:bcchwp:922
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    File URL: https://www.bcentral.cl/documents/33528/133326/DTBC_922.pdf
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    1. Arroyo Marioli, Francisco & Becerra, Juan Sebastián & Solorza, Matías, 2022. "The credit channel in chile through the lens of a semi-structural model," Latin American Journal of Central Banking (previously Monetaria), Elsevier, vol. 3(2).

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