Risky lending, bank leverage and unconventional monetary policy

Ferrante, Francesco

doi:10.1016/j.jmoneco.2018.07.014

Cited by 34 publications

(13 citation statements)

References 31 publications

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“…6We split the impatient household into workers and homeowners to ensure that the problem of the borrowing agent-the homeowner-is linear in net worth, which facilitates aggregation (Ferrante, 2019).…”

Section: The Extended Modelmentioning

confidence: 99%

“…2To be sure, a few papers do model the two channels together. But they either abstract from spreads (Iacoviello 2005, Lombardo andMcAdam 2012) or resort to correlated household-and firm-specific shocks in order to match the joint movements of spreads in the data (Gerali et al 2010, Ferrante 2019). bank deposits tend to increase in bad times, as insured depositors fly to safety, implying that this traditional source of funding does not pose a threat to banks.…”

Section: Introductionmentioning

confidence: 99%

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Banks, Shadow Banks, and Business Cycles

Becard

Gauthier

2021

SSRN Journal

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Credit spreads on household and business loans move in lockstep and spike in every recession. We propose a theory as to why banks tighten their lending standards following a drop in market sentiment. The key feature is a procyclical shadow banking sector that shifts risk from traditional banks to investors through securitisation. We fit the model to euro-area data and find that market sentiment shocks are the main driver of business and financial cycles over the past two decades.

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Section: The Extended Modelmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

Banks, Shadow Banks, and Business Cycles

Becard

Gauthier

2021

SSRN Journal

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“…Our paper is also related to the literature that combines a banking sector that faces balance sheet constraints with household and/or production sectors. Landvoigt (2016) and Ferrante (2019) argue that credit supply shocks, along with shocks to house price uncertainty, play important roles for house prices changes. These papers assume within-sector perfect risk sharing so that each sector is represented by a single agent.…”

Section: Related Literaturementioning

confidence: 99%

Credit Supply Driven Boom-Bust Cycles

2020

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BIS Working Papers are written by members of the Monetary and Economic Department of the Bank for International Settlements, and from time to time by other economists, and are published by the Bank. The papers are on subjects of topical interest and are technical in character. The views expressed in them are those of their authors and not necessarily the views of the BIS. This publication is available on the BIS website (www.bis.org).

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“…Another way to introduce state-contingency into bank balance sheets is through defaultable long-term debt, e.g. as inFerrante (2018).…”

mentioning

confidence: 99%

Banking Panic Risk and Macroeconomic Uncertainty

Mikkelsen¹,

Poeschl

2020

SSRN Journal

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We show that systemic risk in the banking sector breeds macroeconomic uncertainty. In a production economy with a banking sector, financial constraints of banks can lead to disastrous banking panics. We find that a higher probability of a banking panic increases uncertainty in the aggregate economy. We explore the implications of this banking panic-driven uncertainty for business cycles, asset prices and macroprudential regulation. Banking panic-driven uncertainty amplifies business cycle volatility, increases risk premia on asset prices and yields a new benefit from countercyclical bank capital buffers.

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Risky lending, bank leverage and unconventional monetary policy

Cited by 34 publications

References 31 publications

Banks, Shadow Banks, and Business Cycles

Banks, Shadow Banks, and Business Cycles

Credit Supply Driven Boom-Bust Cycles

Banking Panic Risk and Macroeconomic Uncertainty

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