TY - JOUR
T1 - Financial crises, bank risk exposure and government financial policy
AU - Gertler, Mark
AU - Kiyotaki, Nobuhiro
AU - Queralto, Albert
N1 - Funding Information:
We thank Philippe Bacchetta and Elu Von Thadden for helpful comments. Gertler and Kiyotaki also wish to acknowledge the support of the NSF . The views expressed in this paper are those of the authors and should not be interpreted as reflecting the views of the Board of Governors of the Federal Reserve System or of any other person associated with the Federal Reserve System.
PY - 2012/12/15
Y1 - 2012/12/15
N2 - A macroeconomic model with financial intermediation is developed in which the intermediaries (banks) can issue outside equity as well as short term debt. This makes bank risk exposure an endogenous choice. The goal is to have a model that can not only capture a crisis when banks are highly vulnerable to risk, but can also account for why banks adopt such a risky balance sheet in the first place. We use the model to assess quantitatively how perceptions of fundamental risk and of government credit policy in a crisis affect the vulnerability of the financial system ex ante. We also study the effects of macro-prudential policies designed to offset the incentives for risk-taking.
AB - A macroeconomic model with financial intermediation is developed in which the intermediaries (banks) can issue outside equity as well as short term debt. This makes bank risk exposure an endogenous choice. The goal is to have a model that can not only capture a crisis when banks are highly vulnerable to risk, but can also account for why banks adopt such a risky balance sheet in the first place. We use the model to assess quantitatively how perceptions of fundamental risk and of government credit policy in a crisis affect the vulnerability of the financial system ex ante. We also study the effects of macro-prudential policies designed to offset the incentives for risk-taking.
UR - http://www.scopus.com/inward/record.url?scp=84872009217&partnerID=8YFLogxK
UR - http://www.scopus.com/inward/citedby.url?scp=84872009217&partnerID=8YFLogxK
U2 - 10.1016/j.jmoneco.2012.11.007
DO - 10.1016/j.jmoneco.2012.11.007
M3 - Article
AN - SCOPUS:84872009217
SN - 0304-3932
VL - 59
SP - S17-S34
JO - Journal of Monetary Economics
JF - Journal of Monetary Economics
IS - SUPPL.
ER -