Banks and International Business Cycles
This paper incorporates banks into a multi-country dynamic stochastic general equilibrium model. There are saving banks and investment banks. Saving banks collect deposits from households and make loans to investment banks (via an inter-bank market); investment banks fund physical investment project. Both types of banks have to meet prudential capital requirements. The model accounts for key episodes during the current financial crisis. A negative shock to the value of physical capital induces a fall in bank lending, which magnifies considerably the effect of the shock on real activity. The model also explains key facts about international business cycles during 'normal' times better than conventional multi-country macro models--in particular, it allows to better explain the close correlation between US and European business cycles.
|Date of creation:||2010|
|Date of revision:|
|Contact details of provider:|| Postal: Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA|
Web page: http://www.EconomicDynamics.org/
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- Gregory DE WALQUE & Olivier PIERRARD & Abdelaziz ROUABAH, 2009.
"Financial (in)stability, supervision and liquidity injections : a dynamic general equilibrium approach,"
Discussion Papers (IRES - Institut de Recherches Economiques et Sociales)
2009006, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
- Gregory deWalque & Olivier Pierrard & Abdelaziz Rouabah, 2010. "Financial (In)Stability, Supervision and Liquidity Injections: A Dynamic General Equilibrium Approach," Economic Journal, Royal Economic Society, vol. 120(549), pages 1234-1261, December.
- de Walque, Gregory & Pierrard, Olivier & Rouabah, Abdelaziz, 2009. "Financial (In)stability, Supervision and Liquidity Injections: A Dynamic General Equilibrium Approach," CEPR Discussion Papers 7202, C.E.P.R. Discussion Papers.
- Gregory de Walque & Olivier Pierrard & Abdelaziz Rouabah, 2008. "Financial (in)stability, supervision and liquidity injections : a dynamic general equilibrium approach," Working Paper Research 148, National Bank of Belgium.
- Gregory de Walque & Olivier Pierrard & Abdelaziz Rouabah, 2008. "Financial (in)stability, supervision and liquidity injections: a dynamic general equilibrium approach," BCL working papers 35, Central Bank of Luxembourg.
- Blum, Jurg & Hellwig, Martin, 1995. "The macroeconomic implications of capital adequacy requirements for banks," European Economic Review, Elsevier, vol. 39(3-4), pages 739-749, April.
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