Abstract
The financial accelerator refers to the mechanism by which distortions (frictions) in financial markets amplify the propagation of shocks through an economy. This article sets out the theoretical foundations of the financial accelerator in financial friction DSGE (Dynamic Stochastic General Equilibrium) models and discusses the ability of these models to provide policy recommendations and a narrative for the 2007–08 financial crisis.
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de Groot, O. (2018). Financial Accelerator. In: The New Palgrave Dictionary of Economics. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-349-95189-5_3030
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DOI: https://doi.org/10.1057/978-1-349-95189-5_3030
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