Financial frictions and the transmission of foreign shocks in Chile

Abstract: We set up and estimate a DSGE model of a small open economy to assess the role of domestic financial frictions in propagating foreign shocks. In particular, the model features two types of financial frictions: one in the relationship between depositors and banks (following Gertler and K...

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Autores principales: Kirchner, Markus, Justel, Santiago, García Cicco, Javier
Formato: Documento de trabajo
Lenguaje:Español
Publicado: Banco Central de Chile 2022
Materias:
Chile
ECONOMIA
CRISIS ECONOMICA
Acceso en línea:https://repositorio.uca.edu.ar/handle/123456789/15035
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Repositorio Institucional de la Universidad Católica Argentina (UCA) de Universidad Católica Argentina
id I33-R139-123456789-15035
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spelling I33-R139-123456789-150352024-03-21T11:06:57Z Financial frictions and the transmission of foreign shocks in Chile Kirchner, Markus Justel, Santiago García Cicco, Javier Chile ECONOMIA CRISIS ECONOMICA Abstract: We set up and estimate a DSGE model of a small open economy to assess the role of domestic financial frictions in propagating foreign shocks. In particular, the model features two types of financial frictions: one in the relationship between depositors and banks (following Gertler and Karadi, 2011) and the other between banks and borrowers (along the lines of Bernanke et al, 1999). We use Chilean data to estimate the model, following a Bayesian approach. We find that the presence of financial frictions increases the importance of foreign shocks in explaining consumption, inflation, the policy rate, the real exchange rate and the trade balance. In contrast, under financial frictions the role of these foreign shocks in explaining output and investment is somehow reduced. The behavior of the real exchange rate and its interaction with the financial frictions is key to understand the results. Resumen: Se desarrolla y estima un modelo dinámico y estocástico de equilibrio general de una una economía pequeña y abierta para estudiar el rol de fricciones financieras domésticas en propagar shocks externos. En particular, el modelo incluye dos tipos de fricciones: una en la relación entre depositantes y bancos (siguiendo a Gertler y Karadi, 2011) y otra entre los bancos y los deudores (siguiendo a Bernanke et al, 1999). Se utiliza datos de Chile para estimar el modelo, siguiendo un enfoque Bayesiano. Se encuentra que la presencia de fricciones financieras aumenta la importancia de shocks externos para explicar el comportamiento del consumo, la inflación, la tasa de política monetaria, el tipo de cambio real y la balanza comercial. Por otro lado, con la presencia de fricciones financieras los shocks externos parecen menos importantes en explicar la evolución del producto y la inversión. Finalmente, se enfatiza el comportamiento del tipo de cambio real y su interacción con las fricciones financieras para interpretar estos resultados. 2022-09-20T11:56:42Z 2022-09-20T11:56:42Z 2014 Documento de trabajo García Cicco, J., Kirchner, M., Justel, S. Financial frictions and the transmission of foreign shocks in Chile [en línea]. Documentos de Trabajo del Banco Central de Chile. 2014, 772 Disponible en: https://repositorio.uca.edu.ar/handle/123456789/15035 https://repositorio.uca.edu.ar/handle/123456789/15035 spa Acceso abierto http://creativecommons.org/licenses/by-nc-sa/4.0/ application/pdf Banco Central de Chile Documentos de Trabajo del Banco Central de Chile. 2014, 772
institution Universidad Católica Argentina
institution_str I-33
repository_str R-139
collection Repositorio Institucional de la Universidad Católica Argentina (UCA)
language Español
topic Chile
ECONOMIA
CRISIS ECONOMICA
spellingShingle Chile
ECONOMIA
CRISIS ECONOMICA
Kirchner, Markus
Justel, Santiago
García Cicco, Javier
Financial frictions and the transmission of foreign shocks in Chile
topic_facet Chile
ECONOMIA
CRISIS ECONOMICA
description Abstract: We set up and estimate a DSGE model of a small open economy to assess the role of domestic financial frictions in propagating foreign shocks. In particular, the model features two types of financial frictions: one in the relationship between depositors and banks (following Gertler and Karadi, 2011) and the other between banks and borrowers (along the lines of Bernanke et al, 1999). We use Chilean data to estimate the model, following a Bayesian approach. We find that the presence of financial frictions increases the importance of foreign shocks in explaining consumption, inflation, the policy rate, the real exchange rate and the trade balance. In contrast, under financial frictions the role of these foreign shocks in explaining output and investment is somehow reduced. The behavior of the real exchange rate and its interaction with the financial frictions is key to understand the results.
format Documento de trabajo
author Kirchner, Markus
Justel, Santiago
García Cicco, Javier
author_facet Kirchner, Markus
Justel, Santiago
García Cicco, Javier
author_sort Kirchner, Markus
title Financial frictions and the transmission of foreign shocks in Chile
title_short Financial frictions and the transmission of foreign shocks in Chile
title_full Financial frictions and the transmission of foreign shocks in Chile
title_fullStr Financial frictions and the transmission of foreign shocks in Chile
title_full_unstemmed Financial frictions and the transmission of foreign shocks in Chile
title_sort financial frictions and the transmission of foreign shocks in chile
publisher Banco Central de Chile
publishDate 2022
url https://repositorio.uca.edu.ar/handle/123456789/15035
work_keys_str_mv AT kirchnermarkus financialfrictionsandthetransmissionofforeignshocksinchile
AT justelsantiago financialfrictionsandthetransmissionofforeignshocksinchile
AT garciaciccojavier financialfrictionsandthetransmissionofforeignshocksinchile
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