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The Business Cycle Implications of Banks' Maturity Transformation

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Author Info

  • Martin Andreasen

    (Bank of England)

  • Marcelo Ferman

    (London School of Economics)

  • Pawel Zabczyk

    (Bank of England)

Abstract

This paper develops an RBC model where banks use short-term deposits to provide firms with long-term credit. The demand for long-term credit arises because firms borrow in order to finance their capital stock which they only adjust at infrequent intervals. We show that maturity transformation in the banking sector dampens the consumption and investment response to a technology shock. Our model also implies that the average deposit rate is less persistent than the average long-term loan rate, which we show is in line with corporate interest rate data in the US. (Copyright: Elsevier)

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File URL: http://dx.doi.org/10.1016/j.red.2012.12.001
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Bibliographic Info

Article provided by Elsevier for the Society for Economic Dynamics in its journal Review of Economic Dynamics.

Volume (Year): 16 (2013)
Issue (Month): 4 (October)
Pages: 581-600

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Handle: RePEc:red:issued:11-169

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Related research

Keywords: Banks; DSGE model; financial frictions; long-term credit; maturity transformation;

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References

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Citations

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Cited by:
  1. Andreasen, Martin M. & Ferman, Marcelo & Zabczyk, Pawel, 2012. "The business cycle implications of banks' maturity transformation," Working Paper Series 1489, European Central Bank.
  2. Kühl, Michael, 2014. "The financial accelerator and market-based debt instruments: A role for maturities?," Discussion Papers 08/2014, Deutsche Bundesbank, Research Centre.
  3. Holmberg, Ulf, 2012. "The Credit Market and the Determinants of Credit Crunches: An Agent Based Modeling Approach," UmeÃ¥ Economic Studies 836, Umeå University, Department of Economics.
  4. Alessandri, Piergiorgio & Nelson, Benjamin, 2012. "Simple banking: profitability and the yield curve," Bank of England working papers 452, Bank of England.

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