Atanas Pekanov (Projektleitung)
Expectations-driven Credit Growth in New Keynesian DSGE Models With Financial Frictions
Abgeschlossene Forschungsprojekte
Studie von: Österreichisches Institut für Wirtschaftsforschung
Mit finanzieller Unterstützung von: Jubiläumsfonds der Oesterreichischen Nationalbank
Abgeschlossen: 2020
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).
Forschungsbereich:Makroökonomie und europäische Wirtschaftspolitik

Verwandte Einträge

Projektberichte (in Arbeit), Februar 2020
Final report to the "Jubiläumsfonds der Oesterreichischen Nationalbank", Grant No 17782 (Project Co-ordinator: Christian Glocker)
Mit finanzieller Unterstützung von: Jubiläumsfonds der Oesterreichischen Nationalbank
Studie von: Österreichisches Institut für Wirtschaftsforschung
This project documents macroprudential regulation specifics for the case of Austria. We first describe a number of important statistics around the credit cycles, excessive credit growth and property price increases and their identification in Austria. We calculate credit-to-GDP gaps using the Hodrick-Prescott and the Hamilton filter using different definitions of credit and property prices trends and compare them as tools for identification of credit and asset price bubbles. In the second part, we calibrate a medium-scaled New Keynesian DSGE model (IMF MAPMOD model) to the Austrian economy. Different indicators can be used to signal the need of an activation of the countercyclical capital buffer (CCyB) in case of an asset prices bubble. The model is useful for running counterfactual assessments on the costs and benefits of activating the CCyB. It is shown how the policymaker can use the model for welfare analysis of such macroprudential policies, including the costs they impose to the economy and the benefits they deliver after eventual financial crises. The model can then be further extended to create an endogenous asset price or credit bubble. To show this, we use the medium-scale MAPMOD model by the IMF and extend it with a framework in which agents revise their expectations based on recent performance of some variable. This enables the model to create an endogenous credit or asset price increase that will amplify itself. Instead of setting a whole deterministic path for the bubble, the policymaker thus needs to identify only the one-time revision in expectations to identify possibly dangerous expectations-driven bubbles.