Credit Markets Frictions and Macroeconomic Fluctuations



Simon Gilchrist (New York University)



10-14 September 2018



15:30 to 19:00

Intended for


Researchers, practitioners, and graduate students interested in financial macroeconomics.



First-year graduate macroeconomics.



The substantial damage — in terms of lost output, lost jobs, and lost wealth — from the spillover of stress from the global financial system to the global economy more broadly highlights the importance of well-functioning credit markets for macroeconomic performance. This course provides an overview of the recent empirical evidence documenting linkages between financial conditions—as measured by yield spreads on corporate debt instruments and other financial indicators—and real economic activity, and also discusses theoretical frameworks in which financial disturbances affect the real economy via the financial accelerator mechanism emphasized in Bernanke, Gertler and Gilchrist (1999). This course also covers recent research whose aim is to identify financial-real linkages by estimating a New Keynesian Dynamic Stochastic General Equilibrium model augmented with the financial accelerator, and the likely benefits of allowing the monetary authority to respond directly to measures of financial distress in such environments.

This framework is extended to consider (i) economies characterized by stochastic volatility in which firms face significant financial frictions when raising external finance and (ii) the effect of financial factors on inflation dynamics in an environment where firms set prices to influence future market share. Finally, recent empirical work that seeks to identify credit supply shocks and their effect on housing prices, consumption and employment at the local level is discussed.



Credit Spreads and Economic Activity
Financial Frictions in DGSE Models
Uncertainty and Economic Activity
Financial Crises and Inflation Dynamics
Credit Supply Shocks and Local Economic Outcomes


Simon Gilchrist is a professor of Economics at New York University and a research associate at the National Bureau of Economic Research. His research interests relate to monetary economics and applied macroeconomics. Much of his research focuses on the consequences of financial market frictions and their consequences for real economic activity, with particular emphasis on the implications for investment behavior, business-cycle dynamics, and the conduct of monetary policy.

Prior to arriving at New York University in 2017, Simon Gilchrist was a professor at Boston University and also served as a staff economist at the Board of Governors of the Federal Reserve System. He has been an academic consultant to the Board of Governors of the Federal Reserve System, the Bank of Canada, the Bank of England, the Banque de France, the Bank of Japan, the Federal Reserve Banks of Atlanta, Boston, Chicago, New York and San Francisco, and the International Monetary Fund.


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