Financial frictions and the real economy

Arbeitspapier

This paper investigates in a non-linear setting the impact on the real economy of frictions stemming from the financial sector. We develop a medium scale DSGE model with a banking sector where an occasionally binding constraint on banks' capital induces a relevant non-linearity. The model - estimated on Italian data from 1999 to 2015 via a likelihood-free method - is able to generate business cycle asymmetries as in actual data that cannot replicated by linear models. Lastly, the role of macroprudential policies in smoothing the cycle is discussed.

Object Details

• ISBN: 978-92-95081-93-2
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ESRB Working Paper Series ; No. 41

Classification and Topics

• Classification: Wirtschaft ; Statistical Simulation Methods: General ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy ; Financial Crises
• Subject: Financial frictions ; non-linear DSGE Models ; likelihood-free estimation

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Pietrunti, Mario
• Event: Veröffentlichung
• (who): European Systemic Risk Board (ESRB), European System of Financial Supervision
• (where): Frankfurt a. M.
• (when): 2017

Further information

• DOI: doi:10.2849/50795
• Handle: http://hdl.handle.net/10419/193548
• Last update: 10.03.2025, 11:44 AM CET