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Macroeconomic model reference

Financial Accelerator Model

Adds leverage, collateral, and spread dynamics to a structural core so financial amplification becomes explicit.

DSGE models · Sources

Financial Accelerator sources, papers, and evidence trail

Primary papers, model variants, source notes, and review signals behind the Financial Accelerator page.

References

Academic and research sources

Peer-reviewed papers, books, and research used to ground model mechanisms or contested interpretations.

  1. [S1] Handbook of Macroeconomics

    The Financial Accelerator in a Quantitative Business Cycle Framework

    Bernanke, Gertler, and Gilchrist on balance-sheet amplification.

    Academic - Handbook of Macroeconomics - dated 1999

Reference sources

Reference material used for orientation; read primary and academic sources first when claims conflict.

  1. [S2] Reference

    Townsend (1979) -- Optimal Contracts and Competitive Markets with Costly State Verification, the micro foundation for the CSV debt contract.

    Reference

  2. [S3] Reference

    Bernanke and Gertler (1989) -- Agency Costs, Net Worth, and Business Fluctuations, the original partial equilibrium financial accelerator.

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  3. [S4] Reference

    Kiyotaki and Moore (1997) -- Credit Cycles, the parallel collateral-constraint tradition with land as the durable asset.

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  4. [S5] Reference

    Bernanke, Gertler, and Gilchrist (1999) -- The Financial Accelerator in a Quantitative Business Cycle Framework, the canonical DSGE implementation.

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  5. [S6] Reference

    Christiano, Motto, and Rostagno (2003, 2014) -- Risk Shocks, extended BGG with idiosyncratic volatility shocks and Bayesian estimation.

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  6. [S7] Reference

    Iacoviello (2005) -- House Prices, Borrowing Constraints, and Monetary Policy in the Business Cycle, housing-collateral variant.

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  7. [S8] Reference

    Gertler and Kiyotaki (2010) -- Financial Intermediation and Credit Policy in Business Cycle Analysis, moved the friction to the banking sector.

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  8. [S9] Reference

    Jermann and Quadrini (2012) -- Macroeconomic Effects of Financial Shocks, identified financial shocks as a major business cycle driver.

    Reference

Research footing

Evidence and data

Track credit spreads, net worth, collateral values, investment, and defaults as the amplification channel.

Calibration or measurement

External finance premium, net-worth sensitivity, and shock persistence drive the strength of amplification.

Boundaries

  • Bank runs and liquidity spirals need separate mechanics.
  • Distribution within firms is compressed.
  • Identification requires credit-market evidence.

Use guidance

When sufficient
Credit-driven amplification of real shocks when the external finance premium moves inversely with borrower net worth and collateral values. The Bernanke-Gertler-Gilchrist 1999 (Handbook of Macroeconomics) mechanism is the right tool when declining asset prices tighten credit, raise the cost of external funds, and depress investment beyond what the underlying productivity shock alone would produce. The Kiyotaki-Moore 1997 (JPE) collateral channel adds the endogenous asset-price feedback loop.
When sketch only
Do not use for bank-run dynamics, fire-sale spirals in shadow banking, or the full pathology of a systemic crisis. The model amplifies real shocks through borrower balance sheets; it does not model bank capital impairment, interbank-market freezes, or the wholesale-funding runs that characterized 2007 to 2009. Those mechanics require explicit bank-liability modeling.
When to switch
Switch to a model with explicit bank capital constraints (Gertler-Kiyotaki 2010 Handbook; Gertler-Karadi 2011 JME) when the binding friction is on the bank's own balance sheet rather than the borrower's. Switch to a sudden-stop model (Mendoza 2010 AER) when emerging-market capital-flow reversals and sovereign risk define the crisis.
Falsification signal
A deep credit contraction that produces only a mild output decline would falsify the accelerator mechanism, since the model's defining property is that credit tightening amplifies the real shock beyond the direct effect. A chart of credit spreads rising sharply and persistently without a corresponding widening of the output decline relative to trend would indicate the amplification channel is not operating as specified.

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Concepts, data, and nearby models

Open the concept, data series, policy setting, or neighboring model that anchors this page.

Concepts

Financial marketsInterest ratesBusiness cycles

Indicators

Private creditmoney.credit.privatePolicy ratemoney.policy_rateReal GDPgdp.real

Policy

Financial stabilityMacroprudential regulationMonetary policy

Nearby models

New Keynesian DSGEHousing / Credit ABMSVAR