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Slow Recoveries, Endogenous Growth and Macro-prudential Policy

Author

Listed:
  • Dario Bonciani

    (Bank of England)

  • David Gauthier

    (ENSAE)

  • Derrick Kanngiesser

    (Bank of England)

Abstract

Financial crises have severe short and long-term consequences. We develop a general equilibrium model with financial frictions and endogenous growth in which macro-prudential policy supports economic activity and productivity growth by strengthening the resilience of financial intermediaries to adverse shocks. The improved intermediation capacity of a safer financial system leads to a higher steady-state growth rate. The optimal capital ratio increases welfare by 8%, one order of magnitude more than in the case without endogenous growth. (Copyright: Elsevier)

Suggested Citation

  • Dario Bonciani & David Gauthier & Derrick Kanngiesser, 2023. "Slow Recoveries, Endogenous Growth and Macro-prudential Policy," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 51, pages 698-715, December.
    • Handle: RePEc:red:issued:21-145
    DOI: 10.1016/j.red.2023.07.001
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    2. Beqiraj, Elton & Cao, Qingqing & Minetti, Raoul & Tarquini, Giulio, 2023. "Persistent Slumps: Innovation and the Credit Channel of Monetary Policy," Working Papers 2023-3, Michigan State University, Department of Economics.

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    More about this item

    Keywords

    Slow recoveries; Endogenous growth; Financial stability; Macro-prudential policy;
    All these keywords.

    JEL classification:

    • E32 - Macroeconomics and Monetary Economics - - Prices, Business Fluctuations, and Cycles - - - Business Fluctuations; Cycles
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E52 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Monetary Policy
    • G01 - Financial Economics - - General - - - Financial Crises
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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