Towards a measure of financial fragility

Oriol Aspachs, Charles Goodhart, Dimitrios Tsomocos and Lea Zicchino ()

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper proposes a measure of financial fragility that is based on economic welfare in a general equilbrium model calibrated against UK data. The model comprises a household sector, three active heterogeneous banks, a central bank/regulator, incomplete markets, and endogenous default. We address the impact of monetary and regulatory policy, credit and capital shocks in the real and financial sectors and how the response of the economy to shocks relates to our measure of financial fragility. Finally we use panel VAR techniques to investigate the relationships between the factors that characterise financial fragility in our model, i.e. banks’ probabilities of default and banks’ profits - to a proxy of welfare.

Keywords: Financial fragility; Banks; Regulatory policy; Monetary policy; Equilibrium analysis. (search for similar items in EconPapers)
JEL-codes: C33 C68 E4 E5 G11 G21 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2006-02-01
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

Downloads: (external link)
http://eprints.lse.ac.uk/24508/ Open access version. (application/pdf)

Related works:
Journal Article: Towards a measure of financial fragility (2007)
Working Paper: Towards a Measure of Financial Fragility (2006)
Working Paper: Towards a Measure of Financial Fragility (2006)
Working Paper: Towards a Measure of Financial Fragility (2006)
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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:24508

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