Slow Recoveries, Endogenous Growth and Macro-prudential Policy

Dario Bonciani, David Gauthier and Derrick Kanngiesser
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Derrick Kanngiesser: Bank of England

Review of Economic Dynamics, 2023, vol. 51, 698-715

Abstract: Financial crises have severe short and long-term consequences. We develop a general equilibrium model with financial frictions and endogenous growth in which macro-prudential policy supports economic activity and productivity growth by strengthening the resilience of financial intermediaries to adverse shocks. The improved intermediation capacity of a safer financial system leads to a higher steady-state growth rate. The optimal capital ratio increases welfare by 8%, one order of magnitude more than in the case without endogenous growth. (Copyright: Elsevier)

Keywords: Slow recoveries; Endogenous growth; Financial stability; Macro-prudential policy (search for similar items in EconPapers)
JEL-codes: E32 E44 E52 G01 G18 (search for similar items in EconPapers)
Date: 2023
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DOI: 10.1016/j.red.2023.07.001

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