Cardiff University | Prifysgol Caerdydd ORCA
Online Research @ Cardiff 
WelshClear Cookie - decide language by browser settings

UK monetary policy in an estimated DSGE model with financial frictions

Lyu, Juyi, Le, Vo Phuong Mai ORCID:, Meenagh, David ORCID: and Minford, Anthony ORCID: 2023. UK monetary policy in an estimated DSGE model with financial frictions. Journal of International Money and Finance 130 , 102750. 10.1016/j.jimonfin.2022.102750

[thumbnail of 1-s2.0-S026156062200153X-main.pdf]
PDF - Published Version
Available under License Creative Commons Attribution.

Download (3MB) | Preview


This paper develops a dual-state monetary DSGE model that accommodates a refined financial accelerator to analyze UK monetary policy. Unconventional monetary policy (QE) is interpreted as expanding the central bank’s purchases of bonds using M0 to offset financial disruptions at the ZLB. Within a collateral-augmented costly state verification framework, M0 enters the financial accelerator as the cheapest collateral and reduces the cost of credit. The model is tested and estimated using indirect inference and found to fit the UK data for key variables over 1993-2016. We find that while financial shocks are significant, it is productivity shocks that had slowed down the recovery for 2009-2012. Alternative monetary regimes are evaluated and compared.

Item Type: Article
Date Type: Publication
Status: Published
Schools: Business (Including Economics)
Publisher: Elsevier
ISSN: 0261-5606
Date of First Compliant Deposit: 3 October 2022
Date of Acceptance: 2 October 2022
Last Modified: 08 May 2023 02:36

Actions (repository staff only)

Edit Item Edit Item


Downloads per month over past year

View more statistics