Erwartungsgetriebenes Kreditwachstum in neukeynesianischen DSGE Modellen mit finanziellen Friktionen (Expectations-driven credit growth in New Keynesian DSGE models with financial frictions)
Completed research studies
Study by: Austrian Institute of Economic Research
Supported by: Anniversary Fund of the Oesterreichische Nationalbank
Closed: 2020
Research group:Macroeconomics and Public Finance
Language:German
Expectations-driven credit growth in New Keynesian DSGE models with financial frictions
The global financial crisis and its follow-up have caused a major revamp of theoretical macroeconomic models to better reflect
imperfections in financial markets. Macro-models with financial frictions, in the tradition of Bernanke – Gertler – Gilchrist
(1999) or Kiyotaki – Moore (1997), have gained popularity in the last years, as they address both a theoretical shortcoming
of previous models and give more realistic policy conclusions. Their focus is still in the amplification of shocks through
market imperfections and thus in the aftermath of a bust. In our project, we want to focus on the framework introduced by
Bhattacharya – Goodhart – Tsomocos – Vardoulakis (2015) as an explanation behind the excessive credit growth and the increase
in leverage during the upswing. The authors introduce agents as Bayesian learners, which update their beliefs on future outcomes
based on the past and present and therefore can become over-optimistic during the boom phase, in line with the financial instability
hypothesis of Minsky (1992). Our goal is then to augment two popular DSGE New Keynesian models with financial frictions with
this expectations framework. We take the now popular Gertler – Karadi (2011) model of unconventional monetary policy and the
MAPMOD model of the IMF (Benes – Kumhof – Laxton 2014) of macroprudential policy and introduce in them the expectations framework
of Bhattacharya et al. (2015). We estimate the models and aim at validating them by replicating some of the stylised facts
on financial crises, asset price booms and credit expansions as reported by the work of Schularick – Taylor (2012, 2017).