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Current approaches to modeling the imperfections influence in financial markets on business cycle

Current approaches to modeling the imperfections influence in financial markets on business cycle

Journal of Institutional studies, , Vol. 3 (no. 4),
p. 34-47

The paper represents the review of contemporary approaches to the analysis of financial market imperfections andfinancial crises and their impact on fluctuations of the key macroeconomic variables during the business cycle as well as the transmission mechanism of financial shocks on the real economy in the framework of New Keynesian dynamic stochastic general equilibrium models. These models are widely used for the evaluation of monetary policy effects on macroeconomy and constitute the theoretical base for elaboration the optimal monetary policy not only during the crisis but for the further perspective. The construction of such models types for different economies including the Russian economy requires considering the institutional features and specific development and functioning characteristics of the of the national financial sector and economy as a whole.

Keywords: financial market imperfections; financial shocks; financial accelerator; financial intermediaries; NK DSGE model; business cycle; institutional features

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