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Small open economy DSGE model with a banking industry modelled on the financial intermediation approach. Evaluating the performance on UK data

Videnova, Ivona 2016. Small open economy DSGE model with a banking industry modelled on the financial intermediation approach. Evaluating the performance on UK data. PhD Thesis, Cardiff University.
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Abstract

This thesis proposes a new open economy DSGE RBC model with financial intermediation. The objective is to provide a general equilibrium model that can simultaneously account for the behaviour of output and interest rate spreads by solely focusing on the real side of the economy. The standard open economy model is extended to incorporate banking industry, modelled on the production approach, and foreign debt elastic interest rate, which removes the models nonsationary features. The models ability to replicate the data is tested using indirect inference method on both stationary and nonstationary UK data. The same algorithm is used to estimate the parameter values using both types of time series data. This thesis provides the first estimates for the labour share in loan production and elasticity of foreign interest rates with respect to foreign debt obligations for UK economy. The model was retested using the parameter estimates. The results indicate that the proposed framework is able to account for the joint behaviour of output, the interest rate spread and the interest on foreign debt but it was rejected on other endogenous variables.

Item Type: Thesis (PhD)
Status: Unpublished
Schools: Business (Including Economics)
Funders: ESRC
Date of First Compliant Deposit: 19 August 2016
Last Modified: 10 Oct 2017 17:18
URI: http://orca-mwe.cf.ac.uk/id/eprint/93912

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