Financial and Information Frictions in DSGE models

Abstract

This thesis focuses on the analysis of two main independent issues: (i) the characterization ofexpectations in structural models, and (ii) the role of borrower-based macroprudential (BBM) policies inbuilding up financial resilience. The analysis on agents' expectations is divided into two chapters. Thefirst assesses the empirical importance of future economic events that agents expect to be realized. Moreprecisely, it focuses on the role of financial frictions in the origination and transmission of the effect ofthese types of anticipated (news) shocks. The second chapter analyses the implications of relaxing agentsrationality for the transmission mechanism of news shocks. Regarding the analysis of BBM policies, anon-linear DSGE model that allows to assess the cost and benefits of such policies is developed. Themodel explicitly incorporates credit demand and credit supply frictions allowing a comprehensiveanalysis of these policies on both households and banks resilience