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Financial Factors :, Implications for Output Gaps, Pau Rabanal, Marzie Taheri Sanjani

We suggest a new approach for analyzing the role of financial variables and shocks in computing the output gap. We estimate a two-region DSGE model for the euro area, with financial frictions at the household level, between 2000-2013. After joining the monetary union, a decline in some countries’ borrowing costs contributed to a credit, housing and real boom and bust cycle. We show that financial frictions amplified economic fluctuations and the measure of the output gap in those countries. On the contrary, in countries such as France and Germany, financial frictions played a minor role in output gap measures. We also present evidence of the trade-offs faced by the European Central Bank when trying to stabilize two regions in a currency union with unsynchronized economic cycles
Table Of Contents
Cover; Contents; I. INTRODUCTION; List of Figures; 1 Ten Year Government Bond Rates in Selected Euro Area Countries; 2 Excess Credit and Unemployment Rates; II. THE MODEL; A. Credit Markets; A.1. Domestic Intermediaries; A.2. International Intermediaries; B. Households; B.1. Savers; B.2. Labor Unions and Wage Setting; B.3. Borrowers; C. Firms, Technology, and Sticky Prices; C.1. Final Goods Producers; C.2. Intermediate Goods Producers; D. Closing the Model; D.1. Market Clearing Conditions; D.2. Monetary Policy and Interest Rates; III.PARAMETER ESTIMATES; A. Data; B. Calibrated Parameters
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (58 p.)
Specific Material Designation
Form Of Item

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