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Financial Frictions in Macroeconomic Models

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  • Alfred Duncan
  • Charles Nolan

Abstract

In this chapter we: (i) Review the core DSGE workhorse models of financial frictions that existed ahead of the recent financial crisis. (ii) Summarize the recent empirical literature on the history of financial crises. (iii) Summarize the key modelling developments around credit intermediation in DSGE models since the crisis. (iv) Identify gaps in the literature that are especially important for policymakers and modelers.

Suggested Citation

  • Alfred Duncan & Charles Nolan, 2017. "Financial Frictions in Macroeconomic Models," Studies in Economics 1719, School of Economics, University of Kent.
    • Handle: RePEc:ukc:ukcedp:1719
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    2. Philipp Kirchner, 2020. "On shadow banking and fiÂ…nancial frictions in DSGE modeling," MAGKS Papers on Economics 202019, Philipps-Universität Marburg, Faculty of Business Administration and Economics, Department of Economics (Volkswirtschaftliche Abteilung).
    3. Adam, Felix & Matthes, Jürgen, 2018. "Zur Belastbarkeit von Forderungen nach expansiver Fiskalpolitik an der Nullzinsgrenze: Eine Kritik neukeynesianischer Modelle auf Basis einer Literaturanalyse," IW-Reports 7/2018, Institut der deutschen Wirtschaft (IW) / German Economic Institute.
    4. Kirchner Philipp, 2020. "On Shadow Banking and Financial Frictions in DSGE Modeling," Review of Economics, De Gruyter, vol. 71(2), pages 101-133, August.
    5. Chan, Ying Tung & Zhao, Hong, 2019. "How do credit market frictions affect carbon cycles? an estimated DSGE model approach," MPRA Paper 106987, University Library of Munich, Germany, revised 05 Dec 2020.

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    More about this item

    Keywords

    Financial Frictions; Credit Intermediation; Macroeconomics;
    All these keywords.

    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

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