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A Macroeconomic Model with Financially Constrained Producers and Intermediaries / Vadim Elenev, Tim Landvoigt, Stijn Van Nieuwerburgh.
- Format:
- Book
- Author/Creator:
- Elenev, Vadim.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w24757.
- NBER working paper series no. w24757
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2018.
- Summary:
- How much capital should financial intermediaries hold? We propose a general equilibrium model with a financial sector that makes risky long-term loans to firms, funded by deposits from savers. Government guarantees create a role for bank capital regulation. The model captures the sharp and persistent drop in macro-economic aggregates and credit provision as well as the sharp change in credit spreads observed during the Great Recession. Policies requiring intermediaries to hold more capital reduce financial fragility, reduce the size of the financial and non-financial sectors, and locally increase macro-economic volatility. They redistribute wealth from savers to the owners of banks and non-financial firms. Current capital requirements are close to optimal.
- Notes:
- Print version record
- June 2018.
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