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Studying the financial accelerator effect in a two-sector DSGE model for an exportoriented economy

Author

Listed:
  • Andreyev, M.

    (Bank of Russia, Moscow, Russia
    The Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia)

  • Polbin, A.

    (Gaidar Institute for Economic Policy, Moscow, Russia
    The Russian Presidential Academy of National Economy and Public Administration, Moscow, Russia)

Abstract

The article analyzes the financial accelerator effect in a two-sector DSGE model for an export-oriented economy with particular attention to TOT shock and monetary policy. Capital and labor are used for non-tradable and exportable goods production, but exportable goods production requires an additional factor - the "land". We found that the financial accelerator mechanism amplifies investment significantly and has almost no effect on the output. Amplification of the shocks is not symmetric: the fact of shocks acceleration or attenuation depends on the type of shocks and the form of monetary policy. Financial imperfections reinforce the impact of the TOT shock both under the managed exchange rate policy and under the floating exchange rate policy, but under the floating exchange rate policy the amplification is weaker. It is shown that the financial accelerator effect increases with diminishing of the role of the production factor "land" in exportable sector. We show that the attenuation effect in the presence of productivity shock in non-tradable sector is due to the weak growth of the rental price of capital. The weak growth of the rental price results in deterioration of entrepreneurs' balance sheet and therefore the conditions for the functioning of entrepreneurs are getting worse.

Suggested Citation

  • Andreyev, M. & Polbin, A., 2019. "Studying the financial accelerator effect in a two-sector DSGE model for an exportoriented economy," Journal of the New Economic Association, New Economic Association, vol. 44(4), pages 12-49.
    • Handle: RePEc:nea:journl:y:2019:i:44:p:12-49
    DOI: 10.31737/2221-2264-2019-44-4-1
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    Citations

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    Cited by:

    1. FrIrina Kozlovtceva & Alexey Ponomarenko & Andrey Sinyakov & Stas Tatarintsev, 2020. "A case for leaning against the wind in a commodity-exporting economy," International Economics, CEPII research center, issue 164, pages 86-114.
    2. Mikhail Andreyev & Alyona Nelyubina, 2024. "Energy transition scenarios in Russia: effects in macroeconomic general equilibrium model with rational expectations," Bank of Russia Working Paper Series wps122, Bank of Russia.
    3. Irina Kozlovtceva & Alexey Ponomarenko & Andrey Sinyakov & Stas Tatarintsev, 2019. "Financial Stability Implications of Policy Mix in a Small Open Commodity-Exporting Economy," Bank of Russia Working Paper Series wps42, Bank of Russia.
    4. Mikhail Andreyev & Mikhail Andreyev & Mikhail Andreyev, 2020. "Adding a fiscal rule into a DSGE model: How much does it change the forecasts?," Bank of Russia Working Paper Series wps64, Bank of Russia.
    5. Samvel S. Lazaryan & Maria A. Elkina, 2021. "Financial Sector’s Role in Transmission of Monetary and Fiscal Shocks in Russian Economy: Estimation Under Different Assumptions About Production Sector," Finansovyj žhurnal — Financial Journal, Financial Research Institute, Moscow 125375, Russia, issue 6, pages 25-53, December.
    6. Daniil Lomonosov, 2023. "Shocks of Business Activity and Specific Shocks to Oil Market in DSGE Model of Russian Economy and Their Influence Under Different Monetary Policy Regimes," Russian Journal of Money and Finance, Bank of Russia, vol. 82(4), pages 44-79, December.

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    More about this item

    Keywords

    DSGE; financial accelerator; oil price shock; export goods production; monetary policy; Taylor rule; terms of trade (TOT);
    All these keywords.

    JEL classification:

    • D58 - Microeconomics - - General Equilibrium and Disequilibrium - - - Computable and Other Applied General Equilibrium Models
    • E13 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Neoclassical
    • E27 - Macroeconomics and Monetary Economics - - Consumption, Saving, Production, Employment, and Investment - - - Forecasting and Simulation: Models and Applications
    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles

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