Arbeitspapier
What causes banking crises? An empirical investigation
We add the Bernanke-Gertler-Gilchrist model to a modified version of the Smets-Wouters model of the US in order to explore the causes of the banking crisis. We test the model against the data on HP-detrended data and reestimate it by indirect inference; the resulting model passes the Wald test on output, inflation and interest rates. We then extract the model's implied residuals on US unfiltered data since 1984 to replicate how the model predicts the crisis. The main banking shock tracks the unfolding 'sub-prime' shock, which appears to have been authored mainly by US government intervention. This shock worsens the banking crisis but 'traditional' shocks explain the bulk of the crisis; the non-stationarity of the productivity shock plays a key role. Crises occur when there is a 'run' of bad shocks; based on this sample they occur on average once every 40 years and when they occur around half are accompanied by financial crisis. Financial shocks on their own, even when extreme, do not cause crises - provided the government acts swiftly to counteract such a shock as happened in this sample.
- Language
-
Englisch
- Bibliographic citation
-
Series: Cardiff Economics Working Papers ; No. E2012/14
- Classification
-
Wirtschaft
- Event
-
Geistige Schöpfung
- (who)
-
Vo Phuong Mai Le
Meenagh, David
Minford, Patrick
- Event
-
Veröffentlichung
- (who)
-
Cardiff University, Cardiff Business School
- (where)
-
Cardiff
- (when)
-
2012
- Handle
- Last update
-
10.03.2025, 11:43 AM CET
Data provider
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Vo Phuong Mai Le
- Meenagh, David
- Minford, Patrick
- Cardiff University, Cardiff Business School
Time of origin
- 2012
Other Objects (12)
What causes banking crises? An empirical investigation for the world economy
The banking crisis: A rational interpretation
How important is the credit channel? An empirical study of the US banking crisis
Where next for monetary policy? Lessons from the financial crisis and the pandemic
Post-Brexit realism and international law: Renegotiating a bad Withdrawal Agreement
Commentary on economic projections and rules of thumb for monetary policy (by Athanasios Orphanides and Volker Wieland)
Understanding UK trade agreements with the EU and other countries
A note rebutting the recent Cambridge Econometrics assessment of Brexit on the UK and London economies: Commissioned by London Mayor Khan
Free Trade under Brexit: Why its benefits have been widely underestimated
The effects of Brexit on the UK economy
Evaluating European trading arrangements
Why crises happen: Nonstationary macroeconomics
What causes banking crises? An empirical investigation for the world economy
The banking crisis: A rational interpretation
How important is the credit channel? An empirical study of the US banking crisis
Where next for monetary policy? Lessons from the financial crisis and the pandemic
Post-Brexit realism and international law: Renegotiating a bad Withdrawal Agreement
Commentary on economic projections and rules of thumb for monetary policy (by Athanasios Orphanides and Volker Wieland)
Understanding UK trade agreements with the EU and other countries
A note rebutting the recent Cambridge Econometrics assessment of Brexit on the UK and London economies: Commissioned by London Mayor Khan
Free Trade under Brexit: Why its benefits have been widely underestimated
The effects of Brexit on the UK economy
Evaluating European trading arrangements
Why crises happen: Nonstationary macroeconomics
What causes banking crises? An empirical investigation for the world economy
The banking crisis: A rational interpretation
How important is the credit channel? An empirical study of the US banking crisis
Where next for monetary policy? Lessons from the financial crisis and the pandemic
Post-Brexit realism and international law: Renegotiating a bad Withdrawal Agreement
Commentary on economic projections and rules of thumb for monetary policy (by Athanasios Orphanides and Volker Wieland)
Understanding UK trade agreements with the EU and other countries
A note rebutting the recent Cambridge Econometrics assessment of Brexit on the UK and London economies: Commissioned by London Mayor Khan
Free Trade under Brexit: Why its benefits have been widely underestimated
The effects of Brexit on the UK economy
Evaluating European trading arrangements