Arbeitspapier
Banks, credit market frictions, and business cycles
The author proposes a micro-founded framework that incorporates an active banking sector into a dynamic stochastic general-equilibrium model with a financial accelerator. He evaluates the role of the banking sector in the transmission and propagation of the real effects of aggregate shocks, and assesses the importance of financial shocks in U.S. business cycle fluctuations. The banking sector consists of two types of profitmaximizing banks that offer different banking services and transact in an interbank market. Loans are produced using interbank borrowing and bank capital subject to a regulatory capital requirement. Banks have monopoly power, set nominal deposit and prime lending rates, choose their leverage ratio and their portfolio composition, and can endogenously default on a fraction of their interbank borrowing. Because it is costly to raise capital to satisfy the regulatory capital requirement, the banking sector attenuates the real effects of financial shocks, reduces macroeconomic volatilities, and helps stabilize the economy. The model also includes two unconventional monetary policies (quantitative and qualitative easing) that reduce the negative impacts of financial crises.
- Language
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Englisch
- Bibliographic citation
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Series: Bank of Canada Working Paper ; No. 2010-24
- Classification
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Wirtschaft
Business Fluctuations; Cycles
Financial Markets and the Macroeconomy
- Subject
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Economic models
Business fluctuations and cycles
Credit and credit aggregates
Financial stability
Wirtschaftskrise
Schock
Bankgeschäft
Transmissionsmechanismus
Akzelerator
Konjunktur
USA
- Event
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Geistige Schöpfung
- (who)
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Dib, Ali
- Event
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Veröffentlichung
- (who)
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Bank of Canada
- (where)
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Ottawa
- (when)
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2010
- DOI
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doi:10.34989/swp-2010-24
- Handle
- Last update
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20.09.2024, 8:21 AM CEST
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
- Dib, Ali
- Bank of Canada
Time of origin
- 2010