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Methods for assessing the impact of financial effects on business cycles in macroeconometric models

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  • Pagan, Adrian
  • Robinson, Tim

Abstract

Many macroeconometric models are built to understand business cycles. However, the methods applied to assess them are rarely of the form that one learns whether they provide a good explanation of cycle characteristics. In this paper we review and apply techniques that do this for models with financial/real interactions. Using these methods we demonstrate that in models with two common types of financial/real interactions – the financial accelerator and collateral effects – the business cycle is not affected to the extent that the empirical literature suggests is needed.

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  • Pagan, Adrian & Robinson, Tim, 2014. "Methods for assessing the impact of financial effects on business cycles in macroeconometric models," Journal of Macroeconomics, Elsevier, vol. 41(C), pages 94-106.
    • Handle: RePEc:eee:jmacro:v:41:y:2014:i:c:p:94-106
    DOI: 10.1016/j.jmacro.2014.04.002
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    More about this item

    Keywords

    Financial frictions; Business cycles;

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E51 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Money Supply; Credit; Money Multipliers

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