Working Paper

The financial accelerator mechanism: does frequency matter?

Abstract: We use mixed-frequency (quarterly-monthly) data to estimate a dynamic stochastic general equilibrium model embedded with the financial accelerator mechanism à la Bernanke et al. (1999). We find that the financial accelerator can work very differently at monthly frequency compared to quarterly frequency; that is, we document its inversion. That is because aggregating monthly data into quarterly data leads to large biases in the estimated quarterly parameters and, as a consequence, to a deep change in the transmission of shocks.

Keywords: DSGE models; financial accelerator; mixed-frequency data;

JEL Classification: C52; E32; E52;

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Bibliographic Information

Provider: Federal Reserve Bank of Cleveland

Part of Series: Working Papers

Publication Date: 2022-11-07

Number: 22-29