Do banking shocks matter for the U.S. economy?

Naohisa Hirakata, Nao Sudo, Kozo Ueda*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

23 Citations (Scopus)


The quantitative significance of shocks to the financial intermediary (FI) has not received much attention up to now. We estimate a DSGE model with what we describe as chained credit contracts, using Bayesian technique. In the model, credit-constrained FIs intermediate funds from investors to credit-constrained entrepreneurs through two types of credit contract. We find that the shocks to the FIs' net worth play an important role in the investment dynamics, accounting for 17% of its variations. In particular, in the Great Recession, they are the key determinants of the investment declines, accounting for 36% of the variations.

Original languageEnglish
Pages (from-to)2042-2063
Number of pages22
JournalJournal of Economic Dynamics and Control
Issue number12
Publication statusPublished - 2011 Dec
Externally publishedYes


  • Chained credit contracts
  • Financial accelerators
  • Financial intermediaries
  • Monetary policy

ASJC Scopus subject areas

  • Economics and Econometrics
  • Control and Optimization
  • Applied Mathematics


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