Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153626
Authors: 
Christiano, Lawrence
Rostagno, Massimo
Motto, Roberto
Year of Publication: 
2010
Series/Report no.: 
ECB Working Paper 1192
Abstract: 
We augment a standard monetary DSGE model to include a banking sector and financial markets. We fit the model to Euro Area and US data. We find that agency problems in financial contracts, liquidity constraints facing banks and shocks that alter the perception of market risk and hit financial intermediation — ‘financial factors’ in short — are prime determinants of economic fluctuations. They have been critical triggers and propagators in the recent financial crisis. Financial intermediation turns an otherwise diversifiable source of idiosyncratic economic uncertainty, the ‘risk shock’, into a systemic force.
Subjects: 
Bayesian estimation
DSGE model
Financial Frictions
Financial shocks
Funding channel
Lending channel
JEL: 
E3
E22
E44
E51
E52
E58
C11
G1
G21
G3
Document Type: 
Working Paper

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