Year of Graduation
The Role of Financial Market Imperfections in the Transmission Mechanism of Financial Shocks under Different Degrees of Financial Integration
The objective of this study is to analyze the impact of financial shocks on fluctuations in macroeconomic variables under different degrees of financial integration. Growth effects of financial integration for the fluctuations in macroeconomic variables emerging from the impact of financial shocks are investigated in a dynamic, stochastic, general equilibrium framework of a small open economy with financial frictions. In this model financial market imperfections are considered as monopolistic banking sector and collateralized borrowing by firms and households. The model was estimated for Euro Area. It is shown that financial shocks play a significant role in macroeconomic fluctuations and increase in financial integration leads to greater macroeconomic volatility.