The dynamics of the Brazilian economy in a DSGE model with banks and entrepreneurs

Abstract

This paper seeks to contribute to a better understanding of how financial frictions influence the emergence of new companies and, consequently, the dynamics of the Brazilian economy. For this, a DSGE model was used, following Poutineau and Vermandel (2015), estimated with quarterly data from Brazil for the range from 2008 to 2016. The results obtained in this study confirm the conclusions of Poutineau and Vermandel (2015) that financial frictions can play a critical role in replicating real-world behavior, also concluding that financial shocks have a cumulative effect on the economy. On the other hand, it finds that, in the case of Brazil, financial factors are relevant, but not preponderant, for the creation of companies in the shorter period of analysis, presenting a consistent relevance in the long term.