01875cas a2200253 a 4500 AALejournalIMF015365 230101c9999 xx r poo 0 0eng d 5.00 USD 9781513512860 1018-5941 BD-DhAAL BD-DhAAL Rabanal, Pau. Financial Factors : Implications for Output Gaps / Pau Rabanal, Marzie Taheri Sanjani. Washington, D.C. : International Monetary Fund, 2015. 1 online resource (57 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We suggest a new approach for analyzing the role of financial variables and shocks in computing the output gap. We estimate a two-region DSGE model for the euro area, with financial frictions at the household level, between 2000-2013. After joining the monetary union, a decline in some countries' borrowing costs contributed to a credit, housing and real boom and bust cycle. We show that financial frictions amplified economic fluctuations and the measure of the output gap in those countries. On the contrary, in countries such as France and Germany, financial frictions played a minor role in output gap measures. We also present evidence of the trade-offs faced by the European Central Bank when trying to stabilize two regions in a currency union with unsynchronized economic cycles. Mode of access: Internet Taheri Sanjani, Marzie. IMF Working Papers; Working Paper ; No. 2015/153 Full text available on IMF http://elibrary.imf.org/view/journals/001/2015/153/001.2015.issue-153-en.xml IMF e-Library