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ФКН

ICEF Research Seminar (JM) by Grzegorz Dlugoszek (Humboldt-Universität zu Berlin)

On Wednesday, February 13 ICEF held the Research Seminar (JM)
Speaker: Grzegorz Dlugoszek (Humboldt-Universität zu Berlin)
Theme: "Macroeconomic Effects of Financial Uncertainty"

Abstract: This paper investigates the macroeconomic effects of uncertainty originating in the financial sector. To this end, I first document empirical relevance of financial uncertainty using SVAR methods. Then, I employ the DSGE framework developed by Gertler and Karadi (2011) to uncover the underlying transmission mechanism. The model generates macroeconomic dynamics that are consistent with the SVAR evidence. In particular, an increase in financial uncertainty raises the risk premium and leads to a decline in output, consumption, investment and hours worked. This outcome arises mainly because of an endogenous tightening of the financial constraint, which in turn triggers the financial accelerator mechanism. Finally, internal habit formation and nominal rigidities act as additional amplification mechanisms for financial uncertainty shocks.


ICEF seminars