Understanding bank and non-bank credit cycles: a structural exploration

C. Bora Durdu and Molin Zhong

No 919, BIS Working Papers from Bank for International Settlements

Abstract: We explore the structural drivers of bank and nonbank credit cycles using a medium-scale DSGE model with two types of financial intermediation. We posit economy-wide 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. Economy-wide entrepreneurial risk shocks gain predominance for explaining the lower frequency co-movement between the two series. Macro shocks play very little role in explaining financial cycles.

Keywords: emerging bond markets; credit risk; currency risk; Twin Ds; affine model (search for similar items in EconPapers)
JEL-codes: E3 E44 G01 G21 (search for similar items in EconPapers)
Pages: 49 pages
Date: 2021-01
New Economics Papers: this item is included in nep-ban, nep-dge, nep-fdg and nep-mac
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Citations: View citations in EconPapers (1)

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Related works:
Journal Article: Understanding Bank and Nonbank Credit Cycles: A Structural Exploration (2023)
Working Paper: Understanding Bank and Nonbank Credit Cycles: A Structural Exploration (2019)
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Persistent link: https://EconPapers.repec.org/RePEc:bis:biswps:919

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