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Credit and Banking in a DSGE Model (2010)
| Content Provider | CiteSeerX |
|---|---|
| Author | Signoretti, Federico M. Neri, Stefano Sessa, Luca Gerali, Andrea |
| Abstract | We extend the model in Iacoviello (2005) by introducing a stylized banking sector. Loans are supplied by imperfectly competitive banks intermediating funds from both households deposits and the interbank market. Sluggishness in bank interest rates may in principle dampen the effects of monetary policy shocks on borrowing constraints and hence on real activity, resulting in an ’attenuator ’ effect opposite in sign with respect to the ’financial accelerator ’ effect. We calibrate the banking parameters to replicate the observed sluggishness in euro area banking rates and show that this attenuator effect can be sizeable but short-lived. The model also allows analyzing the consequences of a tightening of credit conditions that reduces the supply of credit and increases banks ’ interest rates independently of monetary policy. In such a scenario the effects on output can be sizable, in particular on capital accumulation. |
| File Format | |
| Journal | Journal of Money, Credit and Banking |
| Journal | JOURNAL OF MONEY, CREDIT AND BANKING |
| Publisher Date | 2010-01-01 |
| Access Restriction | Open |
| Subject Keyword | Financial Accelerator Effect Observed Sluggishness Monetary Policy Stylized Banking Sector Bank Interest Rate Attenuator Effect Competitive Bank Household Deposit Credit Condition Dsge Model Attenuator Effect Opposite Interbank Market Banking Parameter Borrowing Constraint Real Activity Euro Area Banking Rate Monetary Policy Shock Capital Accumulation |
| Content Type | Text |
| Resource Type | Article |
