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Macroeconomic stabilisation and bank lending: A simple workhorse model

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  • Spahn, Peter

Abstract

A hybrid standard macro model is supplemented by an explicit analysis of bank lending, based on a five-position aggregative balance sheet. In the model's two versions credit supply is based on a leverage targeting rule or on simple optimisation, taking into account lending risks and funding costs. Model simulations explore consequences of supply and demand disturbances, discretionary interest rate moves, asset valuation and credit risk shocks. Besides standard Taylor policies, the paper compares the relative efficiency of additional stabilisation tools like external-funding taxes and anti-cyclical leverage regulation. Quantitative restrictions for bank activities seem to be useful.

Suggested Citation

  • Spahn, Peter, 2013. "Macroeconomic stabilisation and bank lending: A simple workhorse model," FZID Discussion Papers 76-2013, University of Hohenheim, Center for Research on Innovation and Services (FZID).
    • Handle: RePEc:zbw:fziddp:762013
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    Cited by:

    1. Lukas Scheffknecht, 2013. "Contextualizing Systemic Risk," ROME Working Papers 201317, ROME Network.

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    More about this item

    Keywords

    Taylor rule; Leverage targeting; Financial market shocks; Funding costs; Endogenous money;
    All these keywords.

    JEL classification:

    • E1 - Macroeconomics and Monetary Economics - - General Aggregative Models
    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G2 - Financial Economics - - Financial Institutions and Services

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