A Macroeconomic Model with Occasional Financial Crises

Pascal Paul

No 2017-22, Working Paper Series from Federal Reserve Bank of San Francisco

Abstract: Financial crises occur out of prolonged and credit-fueled boom periods and, at times, they are initiated by relatively small shocks that can have large effects. Consistent with these empirical observations, this paper extends a standard macroeconomic model to include financial intermediation, long-term loans, and occasional financial crises. Within this framework, intermediaries raise their lending and leverage in good times, thereby building up financial fragility. Crises typically occur at the end of a prolonged boom, initiated by a moderate adverse shock that triggers a liquidation of existing investment, a contraction in lending, and ultimately a deep and persistent recession.

JEL-codes: E32 E44 E52 G01 G21 (search for similar items in EconPapers)
Pages: 67 pages
Date: 2019-11-07
New Economics Papers: this item is included in nep-dge, nep-mac and nep-opm
Note: The first version of this paper was published September 25, 2017.
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8)

Downloads: (external link)
http://www.frbsf.org/economic-research/publications/working-papers/2017/22/ Full text - article PDF (application/pdf)

Related works:
Journal Article: A macroeconomic model with occasional financial crises (2020)
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:fip:fedfwp:2017-22

Ordering information: This working paper can be ordered from

DOI: 10.24148/wp2017-22

Access Statistics for this paper

More papers in Working Paper Series from Federal Reserve Bank of San Francisco Contact information at EDIRC.
Bibliographic data for series maintained by Federal Reserve Bank of San Francisco Research Library ().