Uncertainty shocks, banking frictions and economic activity
Title: Uncertainty shocks, banking frictions and economic activity
Citation: Journal of economic dynamics and control, 2016, Vol. 73, pp. 200-219
In this paper we investigate the effects of uncertainty shocks on economic activity in the euro area by using a Dynamic Stochastic General Equilibrium (DSGE) model with heterogenous agents and a stylized banking sector. We show that frictions in credit supply amplify the effects of uncertainty shocks on economic activity. This amplification channel stems mainly from the stickiness in bank loan rates. This stickiness reduces the effectiveness in the transmission mechanism of monetary policy.
Available online 28 September 2016.
Succeeding version: http://hdl.handle.net/1814/55304
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