Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/81901
Authors: 
Queijo von Heideken, Virginia
Year of Publication: 
2008
Series/Report no.: 
Sveriges Riksbank Working Paper Series 223
Abstract: 
This paper aims to evaluate if frictions in credit markets are important for business cycles in the U.S. and the Euro area. For this purpose, I modify the DSGE financial accelerator model developed by Bernanke, Gertler and Gilchrist (1999) by adding frictions such as price indexation to past inflation, sticky wages, consumption habits and variable capital utilization. When I estimate the model with Bayesian methods, I find that financial frictions are relevant in both areas. According to the posterior odds ratio, the data clearly favors the model with financial frictions both in the U.S. and the Euro area. Moreover, consistent with common perceptions, financial frictions are larger in the Euro area.
Subjects: 
Financial frictions
DSGE models
Bayesian estimation
JEL: 
C11
C15
E32
E40
E50
G10
Document Type: 
Working Paper

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