Research Discussion Paper – RDP 2011-04 Assessing Some Models of the Impact of Financial Stress upon Business Cycles

Contents

• Introduction
• Model Designs
• Evidence of Financial Effects on Aggregate Activity
• Two Models with Financial-Real Linkages
• Business Cycle Characteristics of the Models
• Correspondence of GOZ Model Business Outcomes with Stylised Facts
• Correspondence of Iacoviello Model Growth Cycle Outcomes with Stylised Facts
• Conclusion
• Appendix A: Derivation of Debt Growth Equation
• References

The views expressed herein are those of the authors and are not necessarily those of the Reserve Bank of Australia. Mardi Dungey and Jonathan Kearns gave us useful comments on an earlier version, while Richard Swain drew our attention to some issues with the simulations.