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Financial crises, limited asset market participation, and banks balance sheet constraints

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  • Beqiraj Elton
  • Di Bartolomeo Giovanni
  • Di Pietro Marco

Abstract

Our paper focuses on the effects of financial imperfections. It considers the interaction between two kinds of imperfections in an otherwise standard medium--scale New Keynesian economy characterized by nominal price and wage frictions, habits and capital adjustment costs. The imperfection investigated are the long--run limited--asset market participation assumption and the banks' balance sheet constraints due to an agency problem between financial intermediaries and depositors. The key question of the chapter is if the simultaneous presence of both amplifies or mitigates the negative effects of a financial crises, i.e., if these are substitutes or complements for the downturn after the crisis.

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  • Beqiraj Elton & Di Bartolomeo Giovanni & Di Pietro Marco, 2016. "Financial crises, limited asset market participation, and banks balance sheet constraints," wp.comunite 00127, Department of Communication, University of Teramo.
    • Handle: RePEc:ter:wpaper:00127
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    Cited by:

    1. Elton Beqiraj & Giovanni Di Bartolomeo & Marco Di Pietro & Carolina Serpieri, 2017. "Resilience, crisis contagion, and vulnerability in Central Europe and the Baltics," JRC Research Reports JRC109632, Joint Research Centre.
    2. Beqiraj, Elton & Di Bartolomeo, Giovanni & Di Pietro, Marco & Serpieri, Carolina, 2018. "Comparing Central Europe and the Baltic macro-economies: A Bayesian approach," EconStor Preprints 175242, ZBW - Leibniz Information Centre for Economics.

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