Financial Crisis as a Run on Profitable Banks

Sang Rae Kim ()
Additional contact information
Sang Rae Kim: Kyung Hee University

Annals of Economics and Finance, 2024, vol. 25, issue 1, 213-250

Abstract: I build a quantitative macro finance model, motivated by empirical findings in Kim (2023) that shows money market mutual funds withdraw from dealer banks with a high return on equity because safe assets issued by issuers with a higher ROE has lower moneyness. The model features a bank that borrows money by issuing a short-term money-like debt with time-varying moneyness. When lenders deem the bank asset too risky -- using the bank's ROE as a proxy -- the short-term debt no longer serves the role of money. An increase in the regulatory capital requirement affects the real economy through three different offsetting channels.

Keywords: Financial crisis; Safe asset; Private money; Moneyness; Capital requirement (search for similar items in EconPapers)
JEL-codes: E44 E61 G01 G18 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://down.aefweb.net/AefArticles/aef250107Kim.pdf (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cuf:journl:y:2024:v:25:i:1:kim

Access Statistics for this article

Annals of Economics and Finance is currently edited by Heng-fu Zou

More articles in Annals of Economics and Finance from Society for AEF Contact information at EDIRC.
Bibliographic data for series maintained by Qiang Gao ().