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Financial Sector Structure and Financial Crisis Burden: A Model Based on the Russian Default of 1998

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  • George Mavrotas
  • Dmitri Vinogradov

Abstract

We consider an overlapping generations model with two production factors and two types of agents in the presence of financial intermediation and its application to the Russian default of August 1998. The paper focuses on the analysis of the consequences of a sudden negative repayments shock on financial intermediation capacity and consequently on the economy as a whole. The model exhibits a 'chain reaction' property, when a single macroeconomic shock can lead to the exhaustion of credit resources and to the subsequent collapse of the whole banking system.

Suggested Citation

  • George Mavrotas & Dmitri Vinogradov, 2005. "Financial Sector Structure and Financial Crisis Burden: A Model Based on the Russian Default of 1998," WIDER Working Paper Series DP2005-09, World Institute for Development Economic Research (UNU-WIDER).
    • Handle: RePEc:unu:wpaper:dp2005-09
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    References listed on IDEAS

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