Forthcoming: Financial Frictions in Macroeconomic Models
Charles Nolan and I have a survey article on financial macroeconomics forthcoming in the Oxford Research Encyclopedia of Economics and Finance. A recent draft of the survey is available here.
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.
Plot from the paper