Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
5099312 | Journal of Economic Dynamics and Control | 2011 | 22 Pages |
Abstract
The quantitative significance of shocks to the financial intermediary (FI) has not received much attention up to now. We estimate a DSGE model with what we describe as chained credit contracts, using Bayesian technique. In the model, credit-constrained FIs intermediate funds from investors to credit-constrained entrepreneurs through two types of credit contract. We find that the shocks to the FIs' net worth play an important role in the investment dynamics, accounting for 17% of its variations. In particular, in the Great Recession, they are the key determinants of the investment declines, accounting for 36% of the variations.
Related Topics
Physical Sciences and Engineering
Mathematics
Control and Optimization
Authors
Naohisa Hirakata, Nao Sudo, Kozo Ueda,