Banking Structures, Liquidity, and Macroeconomic Stability

Luis Araujo, Elton Beqiraj, David Hong, Sotirios Kokas and Raoul Minetti

No 269, Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Rome

Abstract: Banking is increasingly a complex activity, with financial institutions cooperating in borrowers' financing and monitoring. We study an economy where banks use information to screen investment quality and to recover collateral from investments. Complex banking (lenders' joint production of information on borrowers) eases the salvage of investments but also facilitates the disclosure of investments' fragility. We find that complex banking can be a source of significant macroeconomic non-linearities: it enhances the resilience to small aggregate shocks but can precipitate a crisis following large negative shocks. The predictions of the model are consistent with evidence from matched bank-firm US data.

Keywords: Banking; Aggregate Fluctuations; Information; Investments (search for similar items in EconPapers)
JEL-codes: D83 E44 G21 (search for similar items in EconPapers)
Pages: 64
Date: 2026-01
References: Add references at CitEc
Citations:

Downloads: (external link)
https://www.dipecodir.it/wpsap/data/wp269.pdf (application/pdf)

Related works:
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:sap:wpaper:wp269

Access Statistics for this paper

More papers in Working Papers in Public Economics from Department of Economics and Law, Sapienza University of Rome
Bibliographic data for series maintained by Luisa Giuriato ().