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Title:Assessing macro-financial linkages: A model comparison exercise PDF Logo
Authors:Gerke, Rafael
Jonsson, Magnus
Kliem, Martin
Kolasa, Marcin
Lafourcade, Pierre
Locarno, Alberto
Makarski, Krzysztof
McAdam, Peter
Issue Date:2012
Series/Report no.:Discussion Papers, Deutsche Bundesbank 02/2012
Abstract:The recent global financial crisis has increased interest in macroeconomic models that incorporate financial linkages. Here, we compare the simulation properties of five mediumsized general equilibrium models used in Eurosystem central banks which incorporate such linkages. The financial frictions typically considered are the financial accelerator mechanism (convex \spread costs related to firms' leverage ratios) and collateral constraints (based on asset values). The harmonized shocks we consider illustrate the workings and mechanisms underlying the financial-macro linkages embodied in the models. We also look at historical shock decompositions of real GDP growth across the models since 2005 in order to shed light on the common driving factors underlying the recent financial crisis. In these exercises, the models share qualitatively similar and interpretable features. This gives us confidence that we have some broad understanding of the mechanisms involved. In addition, we also survey the current and developing trends in the literature on financial frictions.
Subjects:Financial Frictions
Credit Constraints
Financial Accelerator
Model Comparison
Eurosystem central bank models
JEL:E32
E44
E47
E52
ISBN:978-3-86558-793-0
Document Type:Working Paper
Appears in Collections:Discussion Papers, Deutsche Bundesbank

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