Understanding Bank and Nonbank Credit Cycles: A Structural Exploration

C. Bora Durdu and Molin Zhong

No 2019-031, Finance and Economics Discussion Series from Board of Governors of the Federal Reserve System (U.S.)

Abstract: We explore the structural drivers of bank and nonbank credit cycles using an estimated medium-scale macro model that allows for bank and nonbank financial intermediation. We posit economy-wide aggregate and sectoral disturbances to potentially drive bank and nonbank credit growth. We find that sectoral shocks affecting the balance sheets of entrepreneurs who borrow from the financial sector are important for the business cycle frequency fluctuations in bank and nonbank credit growth. Economy-wide entrepreneurial risk shocks gain predominance for explaining the longer-horizon comovement between the two series.

Keywords: Banks; Capital Requirements; Credit Cycles; DSGE Models; Leverage; Nonbanks (search for similar items in EconPapers)
JEL-codes: E3 E44 G01 G21 (search for similar items in EconPapers)
Pages: 55 pages
Date: 2019-05-03
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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 non-bank credit cycles: a structural exploration (2021)
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Persistent link: https://EconPapers.repec.org/RePEc:fip:fedgfe:2019-31

DOI: 10.17016/FEDS.2019.031

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