A Descriptive Model of Banking and Aggregate Demand

Jochen Mierau and Mark Mink

De Economist, 2018, vol. 166, issue 2, No 4, 207-237

Abstract: Abstract We integrate a banking sector into an accessible macroeconomic framework, which then provides new insights on developments around the Global Financial Crisis. The analysis shows that growth of banking sector money supply may help explain the secular decline in long-term interest rates before the crisis. A new bank funding channel of monetary transmission clarifies why increases in central bank policy rates could not reverse this trend. Our analysis highlights the distinction between the zero lower bound and the liquidity trap, and shows that bank recapitalizations can be more effective than fiscal expansions in restoring aggregate demand after a banking crisis.

Keywords: Aggregate demand; Banking; Monetary transmission; Global financial crisis (search for similar items in EconPapers)
JEL-codes: E32 E50 E63 G01 G21 G28 (search for similar items in EconPapers)
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s10645-018-9320-4 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
Working Paper: A descriptive model of banking an aggregate demand (2016)
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:kap:decono:v:166:y:2018:i:2:d:10.1007_s10645-018-9320-4

Ordering information: This journal article can be ordered from
http://www.springer. ... cs/journal/10645/PS2

DOI: 10.1007/s10645-018-9320-4

Access Statistics for this article

De Economist is currently edited by Rob Alessie, Bas ter Weel, Casper van Ewijk, Jan C. van Ours and Frank de Jong

More articles in De Economist from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().