Financial Business Cycles
Abstractrecapitalizing or by deleveraging. By deleveraging, banks transform the initial redistribution shock into a classic credit crunch, and amplify and propagate the fi nancial shock to the real economy. In my benchmark experiment, credit losses (that is, a redistribution shock) of about 4% of GDP leads to a 1 percent impact decline on output, whereas they would have no effect on GDP in a model where banks are a veil. Nominal rigidities generate even larger recessions given the same shock.
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Bibliographic InfoPaper provided by Society for Economic Dynamics in its series 2010 Meeting Papers with number 1053.
Date of creation: 2010
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Postal: Society for Economic Dynamics Christian Zimmermann Economic Research Federal Reserve Bank of St. Louis PO Box 442 St. Louis MO 63166-0442 USA
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- Christopher M. Gunn & Alok Johri, 2013.
"Fear of Sovereign Default, Banks, and Expectations-Driven Business Cycles,"
Carleton Economic Papers
13-03, Carleton University, Department of Economics.
- Christopher M. Gunn & Alok Johri, 2013. "Fear of Sovereign Default, Banks, and Expectations-driven Business Cycles," Department of Economics Working Papers 2013-08, McMaster University.
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