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When Nightmares Become Real: Modelling Linkages between the Financial Sector and the Real Economy in the Aftermath of the Financial Crisis

Author

Listed:
  • Philippe Bergevin

    (C.D. Howe Institute)

  • Pierre Duguay

    (C.D. Howe Institute)

  • Paul Jenkins

    (C.D. Howe Institute)

Abstract

Our understanding of the links between the financial sector and the rest of the economy needs to improve concludes this report. The authors say that the complexity of these linkages have been neglected in the models typically used to guide monetary policy – the question is how to remedy deficiencies in policymakers’ economic models of the world, so that they can be used with confidence in guiding policy. The need to factor in a rich representation of the linkages between the financial sector and the real economy is also critically important to determining the extent to which monetary policy can, or should, be used to counteract the buildup of systemic risk in the financial system, the key issue from a policy framework perspective.

Suggested Citation

  • Philippe Bergevin & Pierre Duguay & Paul Jenkins, 2011. "When Nightmares Become Real: Modelling Linkages between the Financial Sector and the Real Economy in the Aftermath of the Financial Crisis," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 332, August.
    • Handle: RePEc:cdh:commen:332
    as

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    File URL: https://www.cdhowe.org/public-policy-research/when-nightmares-become-real-modelling-linkages-between-financial-sector-and-real-economy-aftermath
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    Citations

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    Cited by:

    1. Beachy, Ben, 2012. "A Financial Crisis Manual Causes, Consequences, and Lessons of the Financial Crisis," Working Papers 179105, Tufts University, Global Development and Environment Institute.
    2. Paul Jenkins, 2019. "Into the Unknown: Reflections on Risk, Uncertainty and Monetary Policy Decision-making," C.D. Howe Institute Commentary, C.D. Howe Institute, issue 549, July.
    3. Ben Beachy, 2012. "A Financial Crisis Manual Causes, Consequences, and Lessons of the Financial Crisis," GDAE Working Papers 12-06, GDAE, Tufts University.

    More about this item

    Keywords

    Monetary Policy; financial sector; financial linkages; inflation targeting; Bank of Canada; central banks;
    All these keywords.

    JEL classification:

    • E10 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - General
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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