Uncertainty shocks, banking frictions and economic activity

Arbeitspapier

In this paper we investigate the effects of uncertainty shocks on economic activity in the euro area by using a Dynamic Stochastic General Equilibrium (DSGE) model with heterogeneous agents and a stylized banking sector. We show that frictions in credit supply amplify the effects of uncertainty shocks on economic activity. This amplification channel stems mainly from the stickiness in banking retail interest rates. This stickiness reduces the effectiveness in the transmission mechanism of monetary policy.

Object Details

• ISBN: 978-92-899-1638-7
• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1825

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Monetary Policy
• Subject: Financial frictions ; Perturbation Methods ; Stochastic Volatility ; Third-order approximation ; Uncertainty Shocks

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Bonciani, Dario ; van Roye, Björn
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2015

Further information

• Handle: http://hdl.handle.net/10419/154258
• Last update: 10.03.2025, 11:43 AM CET