EconPapers    
Economics at your fingertips  
 

Banking bubbles and financial crises

Jianjun Miao () and Pengfei Wang ()

Journal of Economic Theory, 2015, vol. 157, issue C, 763-792

Abstract: This paper develops a tractable macroeconomic model with a banking sector in which banks face endogenous borrowing constraints. There is no uncertainty about economic fundamentals. Banking bubbles can emerge through a positive feedback loop mechanism. Changes in household confidence can cause the bubbles to burst, resulting in a financial crisis. Credit policy can mitigate economic downturns. The welfare gain is larger when the government interventions are more front loaded, given that the government injects the same amount of liquidity in terms of present value. Bank capital requirements can prevent the formation of banking bubbles by limiting leverage, but if too restrictive will lead to less lending and hence lower production.

Keywords: Banking bubbles; Multiple equilibria; Financial crises; Credit policies; Capital requirements (search for similar items in EconPapers)
JEL-codes: E2 E44 G01 G20 (search for similar items in EconPapers)
Date: 2015
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (32) Track citations by RSS feed

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S002205311500037X
Full text for ScienceDirect subscribers only

Related works:
Working Paper: Banking Bubbles and Financial Crisis (2012) Downloads
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:eee:jetheo:v:157:y:2015:i:c:p:763-792

DOI: 10.1016/j.jet.2015.02.004

Access Statistics for this article

Journal of Economic Theory is currently edited by A. Lizzeri and K. Shell

More articles in Journal of Economic Theory from Elsevier
Bibliographic data for series maintained by Catherine Liu ().

 
Page updated 2021-06-30
Handle: RePEc:eee:jetheo:v:157:y:2015:i:c:p:763-792