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A Theory of Payments Crises

Saki Bigio

No 1537, 2015 Meeting Papers from Society for Economic Dynamics

Abstract: We provide a descriptive account of aggregate and bank-level nancial ows that occurred during the nancial crisis of 2007-2009 and its aftermath. We collect the following facts: [1] the commercial banking system increased their assets by as much as the shadow banking industry was reduced. [2] Traditional banks suered $656B equity losses. [3] There has been a persistent and substantial discrepancy between book and market equity values for many banks during the period. [4] Low market- to-book banks predicted low earnings and dividend payments. [5] Despite [4], there are no substantial dierences in lending and borrowing in the cross-section: book assets seem to be sticky. We draw on these observations to raise further empirical questions and suggest guidelines for improving banking and macroeconomic models.

Date: 2015
New Economics Papers: this item is included in nep-ban
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More papers in 2015 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
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