Assessing macro-financial linkages: A model comparison exercise

Rafael Gerke, Magnus Jonsson, Martin Kliem, Marcin Kolasa, Pierre Lafourcade, Alberto Locarno (), Krzysztof Makarski and Peter McAdam ()

No 02/2012, Discussion Papers from Deutsche Bundesbank

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.

Keywords: Financial Frictions; Credit Constraints; Financial Accelerator; Model Comparison; Eurosystem central bank models (search for similar items in EconPapers)
JEL-codes: E32 E44 E47 E52 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cmp, nep-dge and nep-mac
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Citations: View citations in EconPapers (8)

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Related works:
Journal Article: Assessing macro-financial linkages: A model comparison exercise (2013)
Working Paper: Assessing macro-financial linkages: a model comparison exercise (2012)
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