A Quantitative Model of Banking Industry Dynamics
P. Dean Corbae () and
Pablo D'Erasmo ()
No 268, 2010 Meeting Papers from Society for Economic Dynamics
business cycles, and borrower default frequencies. The model is parameterized to match a set of key aggregate and cross-sectional statistics for the U.S. banking industry. As in the data, the model generates countercyclical interest rates on loans, bank failure rates, borrower default frequencies, and charge-off rates as well as a procyclical loan supply and entry rates. The model can be used to study bank competition and the benefits/costs of policies to subsidize/mitigate bank entry/exit.
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