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Monetary Policy in an Estimated DSGE Model with a Financial Accelerator

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  • Ali Dib
  • Ian Christensen

Abstract

This paper estimates a sticky-price DSGE model with a financial accelerator to assess the importance of financial frictions in the amplification and propagation of the effects of transitory shocks. Structural parameters of two models, one with and one without a financial accelerator, are estimated using a maximum-likelihood procedure and post-war US data. The estimation and simulation results provide some quantitative evidence in favour of the financial accelerator model. The financial accelerator appears to play an important role in investment fluctuations, but its importance for output depends on the nature of the initial shock

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File URL: http://repec.org/sce2005/up.321.1107189863.pdf
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Bibliographic Info

Paper provided by Society for Computational Economics in its series Computing in Economics and Finance 2005 with number 314.

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Date of creation: 11 Nov 2005
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Handle: RePEc:sce:scecf5:314

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Keywords: Monetary policy; Financial accelerator; DSGE estimation;

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References

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  1. Ben Bernanke & Mark Gertler & Simon Gilchrist, 1998. "The Financial Accelerator in a Quantitative Business Cycle Framework," NBER Working Papers 6455, National Bureau of Economic Research, Inc.
  2. Peter N. Ireland, 2001. "Endogenous Money or Sticky Prices?," Boston College Working Papers in Economics 499, Boston College Department of Economics.
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  9. Lawrence J. Christiano & Martin Eichenbaum & Charles L. Evans, 2005. "Nominal Rigidities and the Dynamic Effects of a Shock to Monetary Policy," Journal of Political Economy, University of Chicago Press, vol. 113(1), pages 1-45, February.
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Citations

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Cited by:
  1. Merola, Rossana, 2010. "Financial frictions and the zero lower bound on interest rates: a DSGE analysis," MPRA Paper 29365, University Library of Munich, Germany.
  2. Frank Smets & Kai Christoffel & Günter Coenen & Roberto Motto & Massimo Rostagno, 2010. "DSGE models and their use at the ECB," SERIEs, Spanish Economic Association, vol. 1(1), pages 51-65, March.
  3. André Kurmann & Nicolas Petrosky-Nadeau, 2007. "Search Frictions in Physical Capital Markets as a Propagation Mechanism," Cahiers de recherche 0712, CIRPEE.
  4. Ferre De Graeve, 2006. "The External Finance Premium and the Macroeconomy: US post-WWII Evidence," Computing in Economics and Finance 2006 84, Society for Computational Economics.
  5. Denise Côté & Christopher Graham, 2007. "Corporate Balance Sheets in Developed Economies: Implications for Investment," Working Papers 07-24, Bank of Canada.
  6. Nicolas Petrosky-Nadeau, 2008. "Credit, Vacancies and Unemployment Fluctuations," 2008 Meeting Papers 640, Society for Economic Dynamics.
  7. Fuchi, Hitoshi & Muto, Ichiro & Ugai, Hiroshi, 2005. "A Historical Evaluation of Financial Accelerator Effects in Japan's Economy," MPRA Paper 4648, University Library of Munich, Germany.
  8. Virginia Queijo, 2005. "Bayesian Estimation of a DSGE Model with Financial Frictions for the U.S. and the Euro Area," Computing in Economics and Finance 2005 306, Society for Computational Economics.
  9. Martha R. López P & Norberto Rodríguez N., . "Financial Accelerator Mechanism: Evidence for Colombia," Borradores de Economia 481, Banco de la Republica de Colombia.
  10. Queijo, Virginia, 2005. "How Important are Financial Frictions in the U.S. and Euro Area?," Seminar Papers 738, Stockholm University, Institute for International Economic Studies.
  11. Alberto Ortiz Bolaños & Last: Ortiz Bolaños, 2012. "Credit Market Shocks, Monetary Policy, and Economic Fluctuations," Documentos de Investigación - Research Papers 6, Centro de Estudios Monetarios Latinoamericanos, CEMLA.
  12. Camilo E Tovar, 2006. "Devaluations, output and the balance sheet effect: a structural econometric analysis," BIS Working Papers 215, Bank for International Settlements.
  13. Ramiro Rodríguez Revilla, 2011. "Modelos de equilibrio general dinámicos y estocásticos para Colombia 1995-2011," REVISTA ECOS DE ECONOMÍA, UNIVERSIDAD EAFIT.
  14. Rossana Merola, 2009. "A bayesian estimation of a DSGE model with financial frictions," CEIS Research Paper 149, Tor Vergata University, CEIS, revised 01 Oct 2009.

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