Banks and early deposit withdrawals in a new Keynesian framework

Alexander Totzek

No 2009-08, Economics Working Papers from Christian-Albrechts-University of Kiel, Department of Economics

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.

Keywords: commercial banks; financial crises; deposit withdrawal (search for similar items in EconPapers)
JEL-codes: E12 E44 E50 G01 (search for similar items in EconPapers)
Date: 2009
New Economics Papers: this item is included in nep-cba and nep-mac
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:cauewp:200908

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