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Financial frictions in macroeconomic fluctations

Author

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  • Vincenzo Quadrini

Abstract

The key ideas for adding financial market frictions in general equilibrium models are not new in macroeconomics. However, it is only with the recent crisis that the profession has fully recognized the importance of financial markets for business cycle fluctuations. In this article I review some of the most popular ideas proposed in the literature and I show how the modeling of financial frictions helps us understand several dynamic features of the macroeconomy.

Suggested Citation

  • Vincenzo Quadrini, 2011. "Financial frictions in macroeconomic fluctations," Economic Quarterly, Federal Reserve Bank of Richmond, issue 3Q, pages 209-254.
  • Handle: RePEc:fip:fedreq:y:2011:i:3q:p:209-254:n:v.97no.3
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    References listed on IDEAS

    as
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    4. Matteo Iacoviello, 2005. "House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle," American Economic Review, American Economic Association, vol. 95(3), pages 739-764, June.
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    15. Chen, Kaiji & Song, Zheng, 2013. "Financial frictions on capital allocation: A transmission mechanism of TFP fluctuations," Journal of Monetary Economics, Elsevier, vol. 60(6), pages 683-703.
    16. Jianjun Miao & PENGFEI WANG, 2010. "Credit Risk and Business Cycles," Boston University - Department of Economics - Working Papers Series WP2010-033, Boston University - Department of Economics.
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