Only recently a branch of the literature has started integrating the banking system in DSGE models. 2  1  The views expressed in this note reflect only those of the author. I thank F. De Fiore, O. Tristani and L. Stracca for input and comments. 2  See, for example, Christiano et al (2007), Goodfriend (2005) and Goodfriend and McCallum (2006).
BIS Review 40/2008  1  One main shortcoming of the macro models currently available for the analysis of financial stability is that intermediaries are typically assumed not to face risks. Risk arises in firms’ production processes (or in households’ ability to earn income) and affects the ability of firms (or households) to repay their debt.