Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/66866
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dc.contributor.authorRadde, Sörenen_US
dc.date.accessioned2012-11-23en_US
dc.date.accessioned2012-11-26T10:33:59Z-
dc.date.available2012-11-26T10:33:59Z-
dc.date.issued2012en_US
dc.identifier.urihttp://hdl.handle.net/10419/66866-
dc.description.abstractThis paper argues that counter-cyclical liquidity hoarding by financial intermediaries may strongly amplify business cycles. It develops a dynamic stochastic general equilibrium model in which banks operate subject to financial frictions and idiosyncratic funding liquidity risk in their intermediation activity. Importantly, the amount of liquidity reserves held in the financial sector is determined endogenously: Balance sheet constraints force banks to trade off insurance against funding outflows with loan scale. The model shows that an aggregate shock to the collateral value of bank assets triggers a flight to liquidity, which amplifies the initial shock and induces credit crunch dynamics sharing key features with the Great Recession. The paper thus develops a new balance sheet channel of shock transmission that works through the composition of banks' asset portfolios rather than fluctuations in borrower net worth as in the financial accelerator literature.en_US
dc.language.isoengen_US
dc.publisher|aDeutsches Institut für Wirtschaftsforschung (DIW) |cBerlinen_US
dc.relation.ispartofseries|aDiscussion Papers, German Institute for Economic Research, DIW Berlin |x1242en_US
dc.subject.jelE22en_US
dc.subject.jelE32en_US
dc.subject.jelE44en_US
dc.subject.ddc330en_US
dc.subject.keywordreal business cyclesen_US
dc.subject.keywordfinancial frictionsen_US
dc.subject.keywordliquidity hoardingen_US
dc.subject.keywordbank capital channelen_US
dc.subject.keywordcredit crunchen_US
dc.titleFlight-to-liquidity and the great recessionen_US
dc.typeWorking Paperen_US
dc.identifier.ppn730406369en_US
dc.rightshttp://www.econstor.eu/dspace/Nutzungsbedingungenen_US

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