Newcastle University Business School

Event Item

How do shocks and frictions within financial markets affect the real economy?

Date/Time: Tuesday 21 February 2017, 17:00-18:00

Venue: Room 4.06, Newcastle University Business School

Speaker: Dr Stephen Millard, BoE and Durham University

The global financial crisis and the Great Recession have shown that linkages between the financial markets and the real economy are crucial. The upheaval in the mortgage and real estate markets, credit markets, and banking systems (formal and shadow) transmitted quickly to a drop in output and investment growth, high unemployment (level and duration) and lower hiring rates.

The academic Macro literature has started to address severe deficiencies in the modelling of these linkages. This seminar aims to explore these linkages in the UK economy using a calibrated DSGE model with labour, capital and financial frictions. Developing such a model enables us to identify credit supply and demand shocks, to uncover the transmission mechanisms from these shocks to the real economy, and to work out the appropriate responses for monetary and macroprudential policy makers. In addition, during this seminar, we explore the effects of financial shocks and financial frictions on the transmission mechanism of monetary and macroprudential policy, given that the degree of the various frictions may substantially affect the response of the economy to such policy changes.

Read Dr Stephen Millard's full biography on his profile page

Research group: Applied Economics