The external finance premium in the UK: a small open economy DSGE model with an empirical indirect inference assessment

Zhu, Zheyi 2017. The external finance premium in the UK: a small open economy DSGE model with an empirical indirect inference assessment. PhD Thesis, Cardiff University. Item availability restricted.

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Abstract

The thesis investigates to what extent external finance premium channels by amplifying the business cycle account for the economy turndown in the UK. It builds a DSGE model follows Smets and Woulters (2007), extends to incorprorate with the Bernanke Gertler and Gilchrist (1999) financial accelerator mechanisms and adjusts for an Armington (1969) version small open economy. We evaluate the model based on the calibration and re-estimate the model by Indirect Inference method using un-filtered nonstationary data in the period of 1975Q1 to 2015Q4 under the inflation targeting monetary policy regime. Although the model captures the counter cyclical feature of external finance premium proposed in most of the literatures, external finance premium shocks on the financial sector do not play a dominant role in explaining a recession. The main dominant effects of output fluctuations are still coming from the non-financial shocks, in particular, the non-stationary productivity shock and the labour supply shock.

Item Type:	Thesis (PhD)
Date Type:	Completion
Status:	Unpublished
Schools:	Business (Including Economics)
Subjects:	H Social Sciences > HB Economic Theory
Date of First Compliant Deposit:	24 October 2017
Last Modified:	15 Sep 2021 09:12
URI:	https://orca.cardiff.ac.uk/id/eprint/105695

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