IDEAS home Printed from https://ideas.repec.org/p/fip/fedfwp/87709.html

Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach

Author

Abstract

We develop a new approach to estimating DSGE models with occasionally binding borrowing constraints and apply it to Mexico’s business cycle and financial crisis history. We propose a new endogenous regime-switching specification of the borrowing constraint, develop a general perturbation method to solve the model, and estimate it using Bayesian methods. The estimated model fits the data with well-behaved shocks, identifying three crisis episodes of varying duration and intensity: the early-1980s Debt Crisis, the mid-1990s Tequila Crisis, and the late-2000s Global Financial Crisis. The estimated crisis episodes are much more persistent and in line with the data than traditional models.

Suggested Citation

  • Gianluca Benigno & Andrew Foerster & Christopher Otrok & Alessandro Rebucci, 2021. "Estimating Macroeconomic Models of Financial Crises: An Endogenous Regime-Switching Approach," Working Paper Series 2020-10, Federal Reserve Bank of San Francisco.
    • Handle: RePEc:fip:fedfwp:87709
    DOI: 10.24148/wp2020-10
    Note: Original paper published 3/30/2020.
    as

    Download full text from publisher

    File URL: https://www.frbsf.org/economic-research/files/wp2020-10.pdf
    File Function: PDF - view
    Download Restriction: no
    File URL: https://www.frbsf.org/research-and-insights/publications/working-papers/2021/07/estimating-macroeconomic-models-of-financial-crises-an-endogenous-regime-switching-approach/
    File Function: FRBSF - view
    Download Restriction: no
    File URL: https://libkey.io/10.24148/wp2020-10?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    Other versions of this item:

    More about this item

    Keywords

    ;
    ;
    ;
    ;
    ;
    ;

    JEL classification:

    • C11 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Bayesian Analysis: General
    • E3 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles
    • F41 - International Economics - - Macroeconomic Aspects of International Trade and Finance - - - Open Economy Macroeconomics
    • G01 - Financial Economics - - General - - - Financial Crises

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:fip:fedfwp:87709. See general information about how to correct material in RePEc.

    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.

    We have no bibliographic references for this item. You can help adding them by using 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 RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Federal Reserve Bank of San Francisco Research Library (email available below). General contact details of provider: https://edirc.repec.org/data/frbsfus.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.