Animal spirits and credit spreads in a model with a cost channel
Shocks in the financial sector caused the great recession of 2008 and pulled down the real economy. To implement financial dynamics in a stylized DSGE-framework we use behavioral elements in expectations to produce waves of bull and bear cycles in the financial intermediation process, that have repercussions on the business cycle dynamics. Our main findings suggest that rapid interest rate reduction and a countercyclical equity regulation in the finance sector can well prevent severe recessions.
|Date of creation:||2011|
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- Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010.
"Credit and Banking in a DSGE Model of the Euro Area,"
Journal of Money, Credit and Banking,
Blackwell Publishing, vol. 42(s1), pages 107-141, 09.
- Andrea Gerali & Stefano Neri & Luca Sessa & Federico M. Signoretti, 2010. "Credit and banking in a DSGE model of the euro area," Temi di discussione (Economic working papers) 740, Bank of Italy, Economic Research and International Relations Area.
- Vasco Cúrdia & Michael Woodford, 2009.
"Credit spreads and monetary policy,"
385, Federal Reserve Bank of New York.
- Ravenna, Federico & Walsh, Carl E., 2006. "Optimal monetary policy with the cost channel," Journal of Monetary Economics, Elsevier, vol. 53(2), pages 199-216, March.
- Bofinger, Peter & Debes, Sebastian, 2010. "A primer on unconventional monetary policy," CEPR Discussion Papers 7755, C.E.P.R. Discussion Papers.
- Christiano, Lawrence & Ilut, Cosmin & Motto, Roberto & Rostagno, Massimo, 2008. "Monetary policy and stock market boom-bust cycles," Working Paper Series 0955, European Central Bank.
- Eric Mayer & Johann Scharler, 2010.
"Noisy Information, Interest Rate Shocks and the Great Moderation,"
Economics working papers
2010-07, Department of Economics, Johannes Kepler University Linz, Austria.
- Mayer, Eric & Scharler, Johann, 2011. "Noisy information, interest rate shocks and the Great Moderation," Journal of Macroeconomics, Elsevier, vol. 33(4), pages 568-581.
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