This paper develops a Dynamic Stochastic General Equilibrium (DSGE) model to study how the instability of the banking sector can amplify and propagate business cycles. The model builds on Bernanke, Gertler and Gilchrist (BGG) (1999), who consider credit demand friction due to agency cost, but it...

This paper proposes a new theoretical framework for the analysis of the relationship between credit shocks, firm defaults and volatility. The key feature of the modelling approach is to allow for the possibility of default in equilibrium. The model is then used to study the impact of credit...

This paper proposes a new Dynamic Stochastic General Equilibrium (DSGE) model with credit frictions and a banking sector, which endogenizes loan-to-value (LTV) ratios of households and banks by expressing them as a function of systemic and idiosyncratic proxies for risk. Moreover, the model...

This paper proposes a new Dynamic Stochastic General Equilibrium (DSGE) model with credit frictions and a banking sector, which endogenizes loan-to-value (LTV) ratios of households and banks by expressing them as a function of systemic and idiosyncratic proxies for risk. Moreover, the model...

This paper studies the extent to which alternative loan loss provisioning regimes affect the procyclicality of the financial system and financial stability. It uses a DSGE model with financial frictions (namely, balance sheet and collateral effects, as well as economies of scope in banking) and...

This paper investigates in a non-linear setting the impact on the real economy of frictions stemming from the financial sector. We develop a medium scale DSGE model with a banking sector where an occasionally binding constraint on banks' capital induces a relevant non-linearity. The model -...

We present an estimated dynamic stochastic general equilibrium model of stock market bubbles and business cycles using Bayesian methods. Bubbles emerge through a positive feedback loop mechanism supported by self-fulfilling beliefs. We identify a sentiment shock that drives the movements of...

This paper studies the cyclical properties of real GDP, house prices, credit, and nominal liquid financial assets in 17 EU countries, by applying several methods to extract cycles. The estimates confirm earlier findings of large medium-term cycles in credit volumes and house prices. GDP appears...

We examine, conditional on structural shocks, the macroeconomic performance of different countercyclical capital buffer (CCyB) rules in small open economy estimated medium scale DSGE. We find that rules based on the credit gap create a trade-off between the stabilization of fluctuations...