The business cycle implications of banks’ maturity transformation

Martin Andreasen, Marcelo Ferman () and Pawel Zabczyk

No 446, Bank of England working papers from Bank of England

Abstract: This paper develops a DSGE model in which banks use short-term deposits to provide firms with long-term credit. The demand for long-term credit arises because firms borrow in order to finance their capital stock which they only adjust at infrequent intervals. We show within a real business cycle framework that maturity transformation in the banking sector in general attenuates the output response to a technological shock. Implications of long-term nominal contracts are also examined in a New Keynesian version of the model, where we find that maturity transformation reduces the real effects of a monetary policy shock.

Keywords: Banks; DSGE model; financial frictions; firm heterogeneity; maturity transformation (search for similar items in EconPapers)
JEL-codes: E22 E32 E44 G21 (search for similar items in EconPapers)
Pages: 43 pages
Date: 2012-03-19
New Economics Papers: this item is included in nep-ban, nep-cba, nep-dge, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

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Related works:
Journal Article: The Business Cycle Implications of Banks' Maturity Transformation (2013)
Working Paper: The business cycle implications of banks' maturity transformation (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:boe:boeewp:0446

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