Limited Asset Market Participation and the Euro Area Crisis: An Empirical DSGE Model

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dc.contributor.authorAlbonico, Alice-
dc.contributor.authorPaccagnini, Alessia-
dc.contributor.authorTirelli, Patrizio- Western Economic Association Internationalen_US
dc.identifier.citationEconomic Inquiryen_US
dc.description.abstractWe estimate a medium‐scale dynamic stochastic general equilibrium model for the Euro area with limited asset market participation (LAMP). Our results suggest that in the recent European Monetary Union years LAMP is particularly sizable (39% during 1993–2012) and important to understand business cycle features. The Bayes factor and the forecasting performance show that the LAMP model is preferred to its representative household counterpart. In the representative agent model the risk premium shock is the main driver of output volatility in order to match consumption correlation with output. In the LAMP model this role is played by the investment‐specific shock, because non‐Ricardian households introduce a Keynesian multiplier effect and raise the correlation between consumption and investments. We also detect the contractionary role of monetary policy shocks during the post‐2007 years. In this period consumption of non‐Ricardian households fell dramatically, but this outcome might have been avoided by a more aggressive policy stance.en_US
dc.description.sponsorshipEuropean Commission - Seventh Framework Programme (FP7)en_US
dc.rightsThis is the peer reviewed version of the following article: Albonico, A. , Paccagnini, A. and Tirelli, P. (2019), Limited Asset Market Participation and the Euro Area Crisis: An Empirical DSGE Model. Economics Inquiry, which has been published in final form at This article may be used for non-commercial purposes in accordance with Wiley Terms and Conditions for Self-Archiving.en_US
dc.subjectLimited asset market participationen_US
dc.subjectBayesian Estimationen_US
dc.subjectEuro areaen_US
dc.subjectBusiness Cycleen_US
dc.subject.classificationC11, C13, C32, E21, E32, E37en_US
dc.titleLimited Asset Market Participation and the Euro Area Crisis: An Empirical DSGE Modelen_US
dc.title.alternativeEstimating a DSGE model with Limited Asset Market Participation for the Euro Areaen_US
dc.typeJournal Articleen_US
dc.statusPeer revieweden_US
dc.description.admin24 month embargo - ACen_US
dc.description.adminUpdate citation details during checkdate report - ACen_US
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