Wholesale Banking and Bank Runs in Macroeconomic Modelling of Financial Crises

Mark Gertler, Nobuhiro Kiyotaki and Andrea Prestipino

No 21892, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: There has been considerable progress in developing macroeconomic models of banking crises. However, most of this literature focuses on the retail sector where banks obtain deposits from households. In fact, the recent financial crisis that triggered the Great Recession featured a disruption of wholesale funding markets, where banks lend to one another. Accordingly, to understand the financial crisis as well as to draw policy implications, it is essential to capture the role of wholesale banking. The objective of this paper is to characterize a model that can be seen as a natural extension of the existing literature that provides a step toward accomplishing this objective. The model accounts for both the buildup and collapse of wholesale banking, and also sketches out the transmission of the crises to the real sector. We also draw out the implications of possible instaibility in the wholesale banking sector for lender-of-last resort policy as well as for macroprudential policy.

JEL-codes: E44 (search for similar items in EconPapers)
Date: 2016-01
New Economics Papers: this item is included in nep-ban, nep-dge and nep-mac
Note: EFG ME
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (76)

Published as M. Gertler, N. Kiyotaki, A. Prestipino, Chapter 16 - Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises, Editor(s): John B. Taylor, Harald Uhlig, Handbook of Macroeconomics, Elsevier, Volume 2, 2016, Pages 1345-1425, ISSN 1574-0048, ISBN 9780444594877, https://doi.org/10.1016/bs.hesmac.2016.03.009.

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Related works:
Chapter: Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises (2016)
Working Paper: Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises (2016)
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