In this paper we investigate the effects of uncertainty shocks on economic activity 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...

This paper studies whether financial variables per se should matter for monetary policy. Earlier consensus view -using financial amplification models with disturbances that have no direct effect on credit market conditions- suggests that financial variables should not be assigned an independent...