Impacts of Financial Factors on Emerging Market Business Cycle Fluctuations

The views expressed in this paper are those of the authors and do not necessarily represent the Bank of Thailand’s policies Our research contributes to a deeper understanding of the interaction between the real and financial sides of the economy by analyzing how balance sheets of not only firms but also banks amplify and propagate business cycles. Based on an open-economy dynamic stochastic general equilibrium model with a double financial accelerator mechanism, our model provides a more complete view of the balance sheet channel of monetary policy transmission and is more useful for an emerging market economy with bank-based financial intermediation than a traditional model with only one financial accelerator