"DSGE Models with Financial Frictions: Does Frequency Matter?" is the title of a talk presented by Paolo Gelain of the Federal Reserve Bank of Cleveland.
We use mixed-frequency data to estimate a dynamic stochastic general equilibrium model embedded with the financial accelerator mechanism a la Bernanke et al. (1999).
The use of financial variables in the estimation, available at high frequency and typically very responsive to changing economic conditions, has a large impact on the estimated parameters.
As a consequence the transmission of shocks and their relevance in explaining endogenous variables variability is deeply altered. In particular we find that the financial accelerator (decelerator) mechanism is either inverted or accentuated.
Sponsored by the Department of Economics Danforth-Lewis Speakers Series