Do banking shocks matter for the U.S. economy?

Naohisa Hirakata, Nao Sudo, Kozo Ueda

Research output: Contribution to journalArticle

17 Citations (Scopus)

Abstract

The quantitative significance of shocks to the financial intermediary (FI) has not received much attention up to now. We estimate a DSGE model with what we describe as chained credit contracts, using Bayesian technique. In the model, credit-constrained FIs intermediate funds from investors to credit-constrained entrepreneurs through two types of credit contract. We find that the shocks to the FIs' net worth play an important role in the investment dynamics, accounting for 17% of its variations. In particular, in the Great Recession, they are the key determinants of the investment declines, accounting for 36% of the variations.

Original languageEnglish
Pages (from-to)2042-2063
Number of pages22
JournalJournal of Economic Dynamics and Control
Volume35
Issue number12
DOIs
Publication statusPublished - 2011 Dec
Externally publishedYes

Fingerprint

Banking
Shock
Determinant
Model
Estimate
US economy
Credit

Keywords

  • Chained credit contracts
  • Financial accelerators
  • Financial intermediaries
  • Monetary policy

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics

Cite this

Do banking shocks matter for the U.S. economy? / Hirakata, Naohisa; Sudo, Nao; Ueda, Kozo.

In: Journal of Economic Dynamics and Control, Vol. 35, No. 12, 12.2011, p. 2042-2063.

Research output: Contribution to journalArticle

Hirakata, Naohisa ; Sudo, Nao ; Ueda, Kozo. / Do banking shocks matter for the U.S. economy?. In: Journal of Economic Dynamics and Control. 2011 ; Vol. 35, No. 12. pp. 2042-2063.
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