Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/153920
Authors: 
Rannenberg, Ansgar
Year of Publication: 
2012
Series/Report no.: 
ECB Working Paper 1487
Abstract: 
I add a moral hazard problem between banks and depositors as in Gertler and Karadi (2009) to a DSGE model with a costly state verification problem between entrepreneurs and banks as in Bernanke et al. (1999) (BGG). This modification amplifies the response of the external finance premium and the overall economy to monetary policy and productivity shocks. It allows my model to match the volatility and correlation with output of the external finance premium, bank leverage, entrepreneurial leverage and other variables in US data better than a BGG-type model. A reasonably calibrated combination of balance sheet shocks produces a downturn of a magnitude similar to the "Great Recession".
Subjects: 
bank capital
financial accelerator
Leverage cycle
output effects of financial shocks
JEL: 
E44
E43
E32
Document Type: 
Working Paper

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