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Financial Factors in Economic Fluctuations

  • Roberto Motto

    (European Central Bank)

  • Massimo Rostagno

    (European Central Bank)

  • Lawrence J. Christiano

    (Northwestern University)

the financial sector and accounts for a significant portion of business cycle fluctuations. We do a detailed study of the role of this shock in the boom-bust of the late 1990s and early 2000s. The new nominal friction corresponds to the fact that lending contracts are typically denominated in nominal terms. Consistent with Fisher (1933), we show that the distributional consequences of this nominal rigidity play an important role in the propagation of shocks.

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Paper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 141.

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Date of creation: 2010
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Handle: RePEc:red:sed010:141
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