Financial frictions and the transmission of foreign shocks in Chile
Abstract: We set up and estimate a DSGE model of a small open economy to assess the role of domestic financial frictions in propagating foreign shocks. In particular, the model features two types of financial frictions: one in the relationship between depositors and banks (following Gertler and K...
Guardado en:
| Autores principales: | , , |
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| Formato: | Documento de trabajo |
| Lenguaje: | Español |
| Publicado: |
Banco Central de Chile
2022
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| Materias: | |
| Acceso en línea: | https://repositorio.uca.edu.ar/handle/123456789/15035 |
| Aporte de: |
| Sumario: | Abstract: We set up and estimate a DSGE model of a small open economy to assess the role of domestic
financial frictions in propagating foreign shocks. In particular, the model features two types of
financial frictions: one in the relationship between depositors and banks (following Gertler and
Karadi, 2011) and the other between banks and borrowers (along the lines of Bernanke et al, 1999).
We use Chilean data to estimate the model, following a Bayesian approach. We find that the
presence of financial frictions increases the importance of foreign shocks in explaining consumption,
inflation, the policy rate, the real exchange rate and the trade balance. In contrast, under financial
frictions the role of these foreign shocks in explaining output and investment is somehow reduced.
The behavior of the real exchange rate and its interaction with the financial frictions is key to
understand the results. |
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