2019
DOI: 10.17016/feds.2019.031
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Understanding Bank and Nonbank Credit Cycles: A Structural Exploration

Abstract: We explore the structural drivers of bank and nonbank credit cycles using an estimated medium-scale macro model that allows for bank and nonbank financial intermediation. We posit economy-wide aggregate and sectoral disturbances to potentially drive bank and nonbank credit growth. We find that sectoral shocks affecting the balance sheets of entrepreneurs who borrow from the financial sector are important for the business cycle frequency fluctuations in bank and nonbank credit growth. Economy-wide entrepreneuri… Show more

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Cited by 6 publications
(3 citation statements)
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“…In a quantitative general equilibrium (real business cycle type) setting, increasing capital requirements forces regulated commercial banks to find more expensive equity funding leading to an expansion of the shadow banking sector as it becomes relatively more profitable (Begenau and Landvoigt, 2021). A further insight from this class of model is that the broader effect of higher capital requirements in the (regulated) banking sector on non-financial sector borrowing may be ambiguous, as reduced leverage (and capacity for lending) in the banking sector is absorbed by higher leverage (and lending) in the shadow banking sector (Durdu and Zhong, 2019).…”
Section: Alternative Modelling Approaches (Mostly Stylized/qualitativ...mentioning
confidence: 99%
“…In a quantitative general equilibrium (real business cycle type) setting, increasing capital requirements forces regulated commercial banks to find more expensive equity funding leading to an expansion of the shadow banking sector as it becomes relatively more profitable (Begenau and Landvoigt, 2021). A further insight from this class of model is that the broader effect of higher capital requirements in the (regulated) banking sector on non-financial sector borrowing may be ambiguous, as reduced leverage (and capacity for lending) in the banking sector is absorbed by higher leverage (and lending) in the shadow banking sector (Durdu and Zhong, 2019).…”
Section: Alternative Modelling Approaches (Mostly Stylized/qualitativ...mentioning
confidence: 99%
“…The importance of the bank capital channel will also depend on the extent to which nonbank financial institutions can substitute lending and liquidity provisions by banks (see e.g. Durdu and Zhong (2019)).…”
Section: Bank Balance Sheets and Leverage Of Financial Institutionsmentioning
confidence: 99%
“…In his model, there is no wholesale funding market. Durdu and Zhong (2019) investigate the drivers of bank and non-bank credit cycles through the lens of a structural model. Fève, Moura, and Pierrard (2019) as well as Gebauer and Mazelis (2019) study regulatory spillovers in an estimated model with shadow banks.…”
Section: Introductionmentioning
confidence: 99%