Financial frictions in a macroeconometric model : a counterfactual analysis for the case of Slovenia

Zabavnik, Darja (author), Verbič, Miroslav (author)

The paper investigates the importance of modelling the effects of financial frictions in a macroeconometric framework for the small open economy of Slovenia. We enhance the model with additional behavioural equations pertaining to business and residential investment, the respective lending rates, and the gross operating surplus of non-financial companies. The estimation period spans from 1999Q1 to 2019Q4, meaning a period of significant financial distress was included in the analysis. Counterfactual analysis was conducted by comparing simulation results from a macroeconometric model with the explicit modelling of financial frictions to a model with limited transmission effects. The results indicate that financial frictions significantly hinder macroeconomic development under adverse macroeconomic scenarios. Policymakers’ measures should focus on maintaining financial sector stability and enabling external financing access for non-financial companies and households during adverse economic situations.

• Language: English
• Keywords: macroeconomics, finance, analysis, financial frictions, macroeconometric modelling, counterfactual analysis
• Work type: Article
• Typology: 1.01 - Original Scientific Article
• Organization: EF - School of Economics and Business
• Publication status: Published
• Publication version: Version of Record
• Year: 2024
• Number of pages: 13 str.
• Numbering: Vol. 48, iss. 4, art. 101224
• PID: 20.500.12556/RUL-165314
• UDC: 005
• ISSN on article: 0939-3625
• DOI: 10.1016/j.ecosys.2024.101224
• COBISS.SI-ID: 195918083
• Publication date in RUL: 02.12.2024

Record is a part of a journal

• Title: Economic systems
• Shortened title: Econ. syst.
• Publisher: Elsevier, Leibniz Institute for East and Southeast European Studies, European Association for Comparative Economic Studies
• ISSN: 0939-3625
• COBISS.SI-ID: 803868

Licences

• License: CC BY-NC-ND 4.0, Creative Commons Attribution-NonCommercial-NoDerivatives 4.0 International
• Link: http://creativecommons.org/licenses/by-nc-nd/4.0/
• Description: The most restrictive Creative Commons license. This only allows people to download and share the work for no commercial gain and for no other purposes.

Secondary language

• Language: Slovenian
• Keywords: makroekonomija, finance, analiza