Understanding Bank and Nonbank Credit Cycles: A Structural Exploration

C. Bora Durdu and Molin Zhong

Journal of Money, Credit and Banking, 2023, vol. 55, issue 1, 103-142

Abstract: We explore the structural drivers of bank and nonbank credit cycles using a medium‐scale dynamic stochastic general equilibrium (DSGE) model with two types of financial intermediation. We posit economywide and sectoral disturbances in both macro and financial sectors. We estimate that sectoral shocks to the balance sheets of entrepreneurs are important for fluctuations in bank and nonbank credit growth at the business cycle frequency. Economywide entrepreneurial risk shocks gain predominance for explaining the lower frequency comovement between the two series. Macro shocks play very little role in explaining financial cycles.

Date: 2023
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https://doi.org/10.1111/jmcb.12918

Related works:
Working Paper: Understanding bank and non-bank credit cycles: a structural exploration (2021)
Working Paper: Understanding Bank and Nonbank Credit Cycles: A Structural Exploration (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:55:y:2023:i:1:p:103-142

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