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Macroeconomic evolution after a shock: the role for financial intermediation

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  • Dmitri Vinogradov

    (Heidelberg University)

Abstract

An overlapping generations model with two production factors and two types of agents is considered in presence of …nancial intermediation. The research focuses at the analysis of the consequences of a suddain negative production shock on a …nancial intermediation capacities and consequently on the economy as a whole. The model exhibits a property of the ”chain reaction” when a single macroeconomic shock can lead to the exhaustion of credit resources and the bankruptcy of the whole banking system. To maintain the capability of the system to recover a regulatory intervention is needed even in presence of the state guarantees on agents’ deposits in the banks (workout incentives). Comparison with a pure market economy shows, that a system with properly regulated intermediation provides intertemporal smoothing of shocks, and the social losses induced by the shock are below those in the market economy.

Suggested Citation

  • Dmitri Vinogradov, 2003. "Macroeconomic evolution after a shock: the role for financial intermediation," Macroeconomics 0310007, EconWPA.
  • Handle: RePEc:wpa:wuwpma:0310007
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    File URL: https://econwpa.ub.uni-muenchen.de/econ-wp/mac/papers/0310/0310007.pdf
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    References listed on IDEAS

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    Cited by:

    1. Mavrotas, George & Vinogradov, Dmitri, 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).
    2. Dmitri Vinogradov, 2005. "Bailout Policy against Financial Intermediation Failures," Finance 0506003, EconWPA.
    3. Dmitri Vinogradov, 2005. "Banks versus Markets in Processing the Payments Shock," Finance 0506004, EconWPA.

    More about this item

    Keywords

    Financial intermediation; overlapping generations; general equilibrium; regulation; intertemporal smoothing;

    JEL classification:

    • D50 - Microeconomics - - General Equilibrium and Disequilibrium - - - General
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E53 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Deposit Insurance
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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