EconPapers    
Economics at your fingertips  
 

A General Equilibrium Appraisal of Capital Shortfall

Eric Jondeau () and Jean-Guillaume Sahuc ()

Working papers from Banque de France

Abstract: We quantify the capital shortfall that results from a global financial crisis by using a macrofinance dynamic stochastic general equilibrium model that captures the interactions between the financial and real sectors of the economy. We show that a crisis similar to that observed in 2008 generates a capital shortfall (or stressed expected loss, SEL) equal to 2.8% of euro-area GDP, which corresponds to approximately 250 billion euros. We also find that using a cycle-dependent capital ratio that combines concern for both credit growth and SEL has a positive effect on output growth while mitigating the excessive risk taking of the banking system. Finally, our estimates confirm that most of the variability of the macroeconomic and financial variables at business cycle frequencies is due to investment and risk shocks.

Keywords: capital shortfall; systemic risk; leverage; financial system; euro area; DSGE model. (search for similar items in EconPapers)
JEL-codes: E32 E44 G01 G21 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge, nep-mac and nep-rmg
Date: 2018
References: View references in EconPapers View complete reference list from CitEc
Citations Track citations by RSS feed

Downloads: (external link)
https://publications.banque-france.fr/sites/defaul ... vail-668_2018-03.pdf (application/pdf)

Related works:
Working Paper: A General Equilibrium Appraisal of Capital Shortfall (2018) 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:bfr:banfra:668

Access Statistics for this paper

More papers in Working papers from Banque de France Banque de France 31 Rue Croix des Petits Champs LABOLOG - 49-1404 75049 PARIS. Contact information at EDIRC.
Bibliographic data for series maintained by Michael brassart ().

 
Page updated 2018-10-21
Handle: RePEc:bfr:banfra:668