Banks, nonbanks, and business cycles

Yvan Becard and David Gauthier

European Economic Review, 2023, vol. 154, issue C

Abstract: European macroeconomic and financial aggregates move in lockstep over the business cycle. We develop a model in which a single risk premium shock triggers these comovements. The key feature is a financial sector where traditional banks transfer part of their risky loan portfolio to nonbank institutions. We fit the model to euro area data and find that risk premium shocks are the main driver of business and financial cycles over the past two decades.

Keywords: Business cycles; Europe; Banks; Nonbank financial institutions (search for similar items in EconPapers)
JEL-codes: E32 E44 G21 G23 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:eecrev:v:154:y:2023:i:c:s0014292123000375

DOI: 10.1016/j.euroecorev.2023.104408

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