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Banking Panic Risk and Macroeconomic Uncertainty

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  • JOHANNES POESCHL
  • JAKOB G. MIKKELSEN

Abstract

We explore the interactions between banking panics and uncertainty shocks. To do so, we build a model of a production economy with a banking sector. In the model, financial constraints of banks can lead to disastrous banking panics. We find that a higher probability of a banking panic increases macroeconomic uncertainty. Vice versa, a shock to macroeconomic uncertainty increases the likelihood of a banking panic. This banking panic channel amplifies the macroeconomic effects of uncertainty shocks. A countercyclical capital buffer increases welfare by reducing the likelihood of a banking panic.

Suggested Citation

  • Johannes Poeschl & Jakob G. Mikkelsen, 2026. "Banking Panic Risk and Macroeconomic Uncertainty," Journal of Money, Credit and Banking, Blackwell Publishing, vol. 58(3), pages 885-918, April.
    • Handle: RePEc:wly:jmoncb:v:58:y:2026:i:3:p:885-918
    DOI: 10.1111/jmcb.13193
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