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Working Paper

The Financial Accelerator Mechanism: Does Frequency Matter?

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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.
 
Topics
Econometrics, modeling, and forecasting
11.07.2022ISSN 2573-7953 WP 22-29DOI 10.26509/frbc-wp-202229
Keywords DSGE models, financial accelerator, mixed-frequency data
JEL Classification Codes C52, E32, E52

Working Papers of the Federal Reserve Bank of Cleveland are preliminary materials circulated to stimulate discussion and critical comment on research in progress. They may not have been subject to the formal editorial review accorded official Federal Reserve Bank of Cleveland publications. The views expressed in this paper are those of the authors and do not represent the views of the Federal Reserve Bank of Cleveland or the Federal Reserve System.

Suggested Citation

Foroni, Claudia, Paolo Gelain, and Massimiliano Marcellino. 2022. “The Financial Accelerator Mechanism: Does Frequency Matter?” Federal Reserve Bank of Cleveland, Working Paper No. 22-29. https://doi.org/10.26509/frbc-wp-202229