I recently read a ECB primer on DSGE models featuring the financial sector and became interested in the field. I also started to read some of the earlier literature in that field (e.g. Gertler & Karadi, 2011) but was hoping to receive some hints on where this literature is currently evolving and if there are any more recent papers that have been widely recognized?


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This is actually one of the more exciting development in DSGE modelling since financial crisis. Including financial sector or friction is definitely a growing area of research and interest.

Unfortunately its quite a new development so there are not that many papers yet out there (however if you consider doing research in this field that also means there is a lot of untapped opportunity to do work there). You will probably want to read most of the works of Gretler who is one of the pioneers in this area. Gertler and Kiyotaki (2015), Gertler and Kardi (2015) and Gertler, Kiyotaki, and Prestipino (2016) are good texts.

Next papers such as Christiano, Motto, and Rostagno (2014) are looking at financial sector in a bit roundabout way but I think can be still considered to be part of this research area.

Lastly, this paper from Christiano, Eichenbaum, and Trabandt is a nice literature review on DSGE modeling since Great Recession. It covers the above mentioned papers plus also some others. It is a general review that looks also on other advances in DSGE modeling and also at their criticism but I would say its worth reading nonetheless even if you are only interested in the financial DSGE models.

You will also find more sources by looking at papers cited in the literature above.


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