The seminar will be held in the Visitor Centre at 3 pm.
Abtract
The last two decades have been characterized by a signi.cant increase in the amounts of collateralized household debt in the U.S. and the Euro Area, along with loosened .nancial constraints for households and businesses, originating from liberalized and deregulated .nancial markets. All of these facts have occurred during what has been labelled the .GreatModeration., a period of reduced macroeconomic volatility, the causes of which are the object of theoretical and applied research.This paper proposes the estimation of a DSGE model that answers the following questions: What is the role of credit frictions faced by the household sector in explaining business cycle dynamics? How relevant are those frictions in the trans-mission of exogenous shocks? How well does the model .t the data, when compared to a standard New Keynesian one? The model provides empirical evidence in favor of the existence of an original transmission mechanism for monetary policy, based on the existence of collateral constrained households. The role of monetary policy is ampli.ed by the existence of nominal private debt, which generates some degree of non-neutrality in the model economy. Bayesian estimation of the structural parameters suggests the importance of such a new channel in terms of reducing the relative role traditionally assigned to nominal rigidities in the propagation of exogenous shocks.
Keywords: Collateral constraints, Household Debt, Bayesian Estimation.
JEL Classi.cation Numbers: C11, E33, E44, E47, E52.