Financial Shocks, Financial Frictions And Financial Intermediaries In DSGE Models: Comments On The Recent Literature

The aim of this paper is to compare and contrast different ways of modeling financial shocks and financial intermediaries in the Dynamic Stochastic General Equilibrium models (DSGE models) and to discuss the empirical evidence on the importance of modeling financial sector and financial shocks in the economy. The analysis is based on four papers on the matter Jerman and Quiadrini (2009), Christiano, Motto and Rostagno (2006), Goodfriend and McCallum (2007), and Gertler and Kiyotaki (2009).