School of Economics

2017 Discussion papers


School of Economics Discussion Paper 17/19


Financial Frictions in Macroeconomic
Models


Alfred Duncan, University of Kent
Charles Nolan, University of Glasgow

December 2017


Abstract:

In this chapter we: (i) Review the core DSGE workhorse models of financial frictions that existed ahead of the recent financial crisis. (ii) Summarize the recent empirical literature on the history of financial crises. (iii) Summarize the key modelling developments around credit intermediation in DSGE models since the crisis. (iv) Identify gaps in the literature that are especially important for policymakers and modelers.

JEL Classification: E32; E44

Keywords: Financial Frictions; Credit Intermediation; Macroeconomics


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Last Updated: 03/01/2018