Download or read book Survey of Research on Financial Sector Modeling Within DSGE Models written by František Brázdik and published by . This book was released on 2013 with total page 26 pages. Available in PDF, EPUB and Kindle. Book excerpt: This survey gives insight into the ongoing research in financial frictions modeling. The recent financial turmoil has fueled interest in operationalizing financial frictions concepts. The rapid growth of the literature on financial frictions motivates this review. The empirical facts that motivate the inclusion of financial frictions are surveyed. This survey provides a description of the basic approaches for introducing financial frictions into dynamic stochastic general equilibrium models. The significance and empirical identification of the financial accelerator effect is then discussed. The role of financial frictions models in CNB monetary and macroprudential policy is described. It is concluded that given the heterogeneity of the approaches to financial frictions it is beneficial for the conduct of monetary policy to focus on the development of satellite approaches. DSGE models with financial frictions used to generate stress-testing scenarios could complement current stress-testing practice, but are not able to replace it.

Download or read book Macrofinancial Modeling At Central Banks written by Mr.Scott Roger and published by International Monetary Fund. This book was released on 2012-01-01 with total page 39 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper surveys dynamic stochastic general equilibrium models with financial frictions in use by central banks and discusses priorities for future development of such models for the purpose of monetary and financial stability analysis. It highlights the need to develop macrofinancial models which allow analysis of the macroeconomic effects of macroprudential policy tools and to evaluate elements of the Basel III reforms as a priority. The paper also reviews the main approaches to introducing financial frictions into general equilibrium models.

Download or read book On Shadow Banking and Financial Frictions in DSGE Modeling written by Philipp Kirchner and published by . This book was released on 2020 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt: At the forefront of macroeconomic research on the causes of the Great Financial Cri- sis (GFC) was and still is the usage of dynamic stochastic general equilibrium (DSGE) models. To capture the nonlinearities of the GFC, these models were enriched with a variety of financial frictions. This paper focuses on a special subset of these frictions, the shadow banking system. We provide a structured review of the strand of literature that considers shadow banking in DSGE setups and draw particular attention to the mod- eling approach as well as impact of shadow banking. Our analysis allows the following conclusions: firstly, models featuring shadow banking are better able to simulate realistic movements in the business cycle that are of comparable magnitude to the GFC. Secondly, the models consider amplification channels between the financial sector and the real econ- omy that proved to be of importance during the crisis. Thirdly, the models display a good explanatory power of financial stability measures in the light of shadow banking.

Download or read book Financial Crises in DSGE Models written by Mr.Jaromir Benes and published by International Monetary Fund. This book was released on 2014-04-04 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents the theoretical structure of MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of financial cycles. A companion paper studies the simulation properties of MAPMOD.

Download or read book Financial Crises in DSGE Models written by Mr.Jaromir Benes and published by International Monetary Fund. This book was released on 2014-04-04 with total page 59 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper presents the theoretical structure of MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of financial cycles. A companion paper studies the simulation properties of MAPMOD.

Download or read book Financial Crises in DSGE Models written by Mr.Jaromir Benes and published by International Monetary Fund. This book was released on 2014-04-04 with total page 55 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper, together with a technical companion paper, presents MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of both the pre-crisis and crisis phases of financial cycles.

Download or read book DSGE Models for Real Business Cycle and New Keynesian Macroeconomics written by Giuseppe Chirichiello and published by Springer Nature. This book was released on with total page 380 pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Macro Prudential Stress Test Models A Survey written by David Aikman and published by International Monetary Fund. This book was released on 2023-08-25 with total page 50 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this paper, we survey the rapidly developing literature on macroprudential stress-testing models. The scope of the survey includes models of contagion between banks, models of contagion within the wider financial system including non-bank financial institutions such as investment funds, and models that emphasise the two-way interaction between the financial sector and the real economy. Our aim is two-fold: first, to provide a reference guide of the state-of-the-art for those developing such models; second, to distil insights from this endeavour for policy-makers using these models. In our view, the modelling frontier faces three main challenges: (a) our understanding of the potential for amplification in sectors of the non-bank financial system during periods of stress, (b) multi-sectoral models of the non-bank financial system to analyse the behaviour of the overall demand and supply of liquidity under stress and (c) stress testing models that incorporate comprehensive two-way interactions between the financial system and the real economy. Emerging lessons for policy-makers are that, for a given-sized shock hitting the system, its eventual impact will depend on (a) the size of financial institutions' capital and liquidity buffers, (b) the liquidation strategies financial institutions adopt when they need to raise cash, and (c) the topology of the financial network.

Download or read book Dealing with Misspecification in DSGE Models written by Alessia Paccagnini and published by . This book was released on 2017 with total page 41 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dynamic Stochastic General Equilibrium (DSGE) models are the main tool used in Academia and in Central Banks to evaluate the business cycle for policy and forecasting analyses. Despite the recent advances in improving the fit of DSGE models to the data, the misspecification issue still remains. The aim of this survey is to shed light on the different forms of misspecification in DSGE modeling and how the researcher can identify the sources. In addition, some remedies to face with misspecification are discussed.

Download or read book Handbook of Computable General Equilibrium Modeling written by Peter B. Dixon and published by Newnes. This book was released on 2013-11-14 with total page 1143 pages. Available in PDF, EPUB and Kindle. Book excerpt: In this collection of 17 articles, top scholars synthesize and analyze scholarship on this widely used tool of policy analysis, setting forth its accomplishments, difficulties, and means of implementation. Though CGE modeling does not play a prominent role in top US graduate schools, it is employed universally in the development of economic policy. This collection is particularly important because it presents a history of modeling applications and examines competing points of view. - Presents coherent summaries of CGE theories that inform major model types - Covers the construction of CGE databases, model solving, and computer-assisted interpretation of results - Shows how CGE modeling has made a contribution to economic policy

Download or read book Small DSGE Model with Financial Frictions written by Wondemhunegn Ezezew Melesse and published by . This book was released on 2019 with total page 35 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the last few years, macroeconomic modelling has emphasised the role of credit market frictions in magnifying and transmitting nominal and real disturbances and their implication for macro-prudential policy design. In this paper, we construct a modest New Keynesian general equilibrium model with active banking sector. In this set-up, the financial sector interacts with the real side of the economy via firm balance sheet and bank capital conditions and their impact on investment and production decisions. We rely on the financial accelerator mechanism due to Bernanke et al. (1999) and combine it with a bank capital channel as demonstrated by Aguiar and Drumond (2007). We calibrate the resulting model from the perspective of a low income economy reflecting the existence of relatively high investment adjustment cost, strong fiscal dominance, and underdeveloped financial and capital markets where the central bank uses money growth in stabilizing the national economy. Then we examine the impulse response of selected endogenous variables to shocks stemming from the fiscal authority, the monetary policy process, and technological progress. The findings are broadly consistent with previous studies that demonstrated stronger role for credit market imperfections in amplifying and propagating monetary policy shocks. Moreover, we also compare the trajectory of the model economy under alternative monetary policy instruments. The results suggest that the model with money growth rule generates higher volatility in output and inflation than the one with interest rate rule.

Download or read book The Chicago Plan Revisited written by Mr.Jaromir Benes and published by International Monetary Fund. This book was released on 2012-08-01 with total page 71 pages. Available in PDF, EPUB and Kindle. Book excerpt: At the height of the Great Depression a number of leading U.S. economists advanced a proposal for monetary reform that became known as the Chicago Plan. It envisaged the separation of the monetary and credit functions of the banking system, by requiring 100% reserve backing for deposits. Irving Fisher (1936) claimed the following advantages for this plan: (1) Much better control of a major source of business cycle fluctuations, sudden increases and contractions of bank credit and of the supply of bank-created money. (2) Complete elimination of bank runs. (3) Dramatic reduction of the (net) public debt. (4) Dramatic reduction of private debt, as money creation no longer requires simultaneous debt creation. We study these claims by embedding a comprehensive and carefully calibrated model of the banking system in a DSGE model of the U.S. economy. We find support for all four of Fisher's claims. Furthermore, output gains approach 10 percent, and steady state inflation can drop to zero without posing problems for the conduct of monetary policy.

Download or read book Financial Frictions and the Wealth Distribution written by Jesús Fernández-Villaverde and published by . This book was released on 2019 with total page 69 pages. Available in PDF, EPUB and Kindle. Book excerpt: This paper investigates how, in a heterogeneous agents model with financial frictions, idiosyncratic individual shocks interact with exogenous aggregate shocks to generate time-varying levels of leverage and endogenous aggregate risk. To do so, we show how such a model can be efficiently computed, despite its substantial nonlinearities, using tools from machine learning. We also illustrate how the model can be structurally estimated with a likelihood function, using tools from inference with diffusions. We document, first, the strong nonlinearities created by financial frictions. Second, we report the existence of multiple stochastic steady states with properties that differ from the deterministic steady state along important dimensions. Third, we illustrate how the generalized impulse response functions of the model are highly state-dependent. In particular, we find that the recovery after a negative aggregate shock is more sluggish when the economy is more leveraged. Fourth, we prove that wealth heterogeneity matters in this economy because of the asymmetric responses of household consumption decisions to aggregate shocks.

Download or read book GDP at Risk in a DSGE Model written by Esa Jokivuolle and published by . This book was released on 2007 with total page pages. Available in PDF, EPUB and Kindle. Book excerpt:

Download or read book Research Anthology on Macroeconomics and the Achievement of Global Stability written by Management Association, Information Resources and published by IGI Global. This book was released on 2022-08-05 with total page 1953 pages. Available in PDF, EPUB and Kindle. Book excerpt: The COVID-19 pandemic has shocked economies around the world and created an era of global instability. As the pandemic comes to a close, it is essential to examine global economies in order to achieve and maintain global stability. By maintaining global stability, the world may be prepared for future economic shocks. The Research Anthology on Macroeconomics and the Achievement of Global Stability discusses the emerging opportunities, challenges, and strategies within the field of macroeconomics. It features advancements in the field that encourage global economic stability. Covering topics such as Islamic banking, international trade, and Econophysics, this major reference work is an ideal resource for economists, government leaders and officials, business leaders and executives, finance professionals, students and educators of higher education, librarians, researchers, and academicians.

Download or read book Bayesian Estimation of DSGE Models written by Edward P. Herbst and published by Princeton University Press. This book was released on 2015-12-29 with total page 295 pages. Available in PDF, EPUB and Kindle. Book excerpt: Dynamic stochastic general equilibrium (DSGE) models have become one of the workhorses of modern macroeconomics and are extensively used for academic research as well as forecasting and policy analysis at central banks. This book introduces readers to state-of-the-art computational techniques used in the Bayesian analysis of DSGE models. The book covers Markov chain Monte Carlo techniques for linearized DSGE models, novel sequential Monte Carlo methods that can be used for parameter inference, and the estimation of nonlinear DSGE models based on particle filter approximations of the likelihood function. The theoretical foundations of the algorithms are discussed in depth, and detailed empirical applications and numerical illustrations are provided. The book also gives invaluable advice on how to tailor these algorithms to specific applications and assess the accuracy and reliability of the computations. Bayesian Estimation of DSGE Models is essential reading for graduate students, academic researchers, and practitioners at policy institutions.

Download or read book Dealing with Financial Instability Under a DSGE Modeling Approach with Banking Intermediation written by Stelios Bekiros and published by . This book was released on 2015 with total page 0 pages. Available in PDF, EPUB and Kindle. Book excerpt: In the dynamic stochastic general equilibrium (DSGE) literature there has been an increasing awareness on the role that the banking sector can play in macroeconomic activity. We present a DSGE model with financial intermediation as in Gertler and Karadi (2011). The estimation of shocks and of the structural parameters shows that time-variation should be crucial in any attempted empirical analysis. Since DSGE modelling usually fails to take into account inherent nonlinearities of the economy, we propose a novel time-varying parameter (TVP) state-space estimation method for VAR processes both for homoskedastic and heteroskedastic error structures. We conduct an exhaustive empirical exercise to compare the out-of-sample predictive performance of the estimated DSGE model with that of standard ARs, VARs, Bayesian VARs and TVP-VARs. We find that the TVP-VAR provides the best forecasting performance for the series of GDP and net worth of financial intermediaries for all steps-ahead, while the DSGE model outperforms the other specifications in forecasting inflation and the federal funds rate at shorter horizons.