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Banks and early deposit withdrawals in a new Keynesian framework

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  • Totzek, Alexander

Abstract

When the current financial crisis has widened to a global economic crisis an urgent call for implementing financial markets and financial institutions in business cycle models emerged. By modelling commercial banks as a third type of economic agent, we are able to implement the feature of early deposit withdrawals in a New Keynesian model and to investigate the resulting implications for the real sector. The main results are that an extended withdrawal rate leads to persistent stagflationary effects which are dampened by reducing the refinancing costs of the banking sector and by increasing the loan rate stickiness.

Suggested Citation

  • Totzek, Alexander, 2009. "Banks and early deposit withdrawals in a new Keynesian framework," Economics Working Papers 2009-08, Christian-Albrechts-University of Kiel, Department of Economics.
    • Handle: RePEc:zbw:cauewp:200908
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    More about this item

    Keywords

    commercial banks; financial crises; deposit withdrawal;
    All these keywords.

    JEL classification:

    • E12 - Macroeconomics and Monetary Economics - - General Aggregative Models - - - Keynes; Keynesian; Post-Keynesian; Modern Monetary Theory
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E50 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - General
    • G01 - Financial Economics - - General - - - Financial Crises

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