Wholesale Banking and Bank Runs in Macroeconomic Modelling of Financial Crises / Mark Gertler, Nobuhiro Kiyotaki, Andrea Prestipino.

Format:

Book

Author/Creator:

Gertler, Mark.

Contributor:

National Bureau of Economic Research.

Kiyotaki, Nobuhiro.

Prestipino, Andrea.

Series:

Working Paper Series (National Bureau of Economic Research) no. w21892.

NBER working paper series no. w21892

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2016.

Summary:

There has been considerable progress in developing macroeconomic models of banking crises. However, most of this literature focuses on the retail sector where banks obtain deposits from households. In fact, the recent financial crisis that triggered the Great Recession featured a disruption of wholesale funding markets, where banks lend to one another. Accordingly, to understand the financial crisis as well as to draw policy implications, it is essential to capture the role of wholesale banking. The objective of this paper is to characterize a model that can be seen as a natural extension of the existing literature that provides a step toward accomplishing this objective. The model accounts for both the buildup and collapse of wholesale banking, and also sketches out the transmission of the crises to the real sector. We also draw out the implications of possible instaibility in the wholesale banking sector for lender-of-last resort policy as well as for macroprudential policy.

Notes:

Print version record

January 2016.