Expectations and policy in DSGE models
(2024)
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- Abstract
- This thesis focuses on the analysis of two main independent issues: (i) the characterization of expectations in structural models, and (ii) the role of borrower-based macroprudential (BBM) policies in building up financial resilience. The analysis on agents' expectations is divided into two chapters. The first assesses the empirical importance of future economic events that agents expect to be realized. More precisely, it focuses on the role of financial frictions in the origination and transmission of the effect of these types of anticipated (news) shocks. The second chapter analyzes the implications of relaxing agents rationality for the transmission mechanism of news shocks. Regarding the analysis of BBM policies, a non-linear DSGE model that allows to assess the cost and benefits of such policies is developed. The model explicitly incorporates credit demand and credit supply frictions allowing a comprehensive analysis of these policies on both households and banks resilience. Both questions (i) and (ii) are mainly analyzed through the prism of DSGE models. Hence, as an introductory chapter to motivate the use of such models, I show that DSGE models are well-suited to address these questions.
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Herrera Bravo, L. (2024). Expectations and policy in DSGE models. https://hdl.handle.net/2078.5/233167