Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/154260
Authors: 
Derviz, Alexis
Mendicino, Caterina
Moyen, Stéphane
Nikolov, Kalin
Stracca, Livio
Clerk, Laurent
Suarez, Javier
Vardoulakis, Alexandros P.
Year of Publication: 
2015
Series/Report no.: 
ECB Working Paper 1827
Abstract: 
We develop a dynamic general equilibrium model for the positive and normative analysis of macroprudential policies. Optimizing financial intermediaries allocate their scarce net worth together with funds raised from saving households across two lending activities, mortgage and corporate lending. For all borrowers (households, firms, and banks) external financing takes the form of debt which is subject to default risk. This “3D model” shows the interplay between three interconnected net worth channels that cause financial amplification and the distortions due to deposit insurance. We apply it to the analysis of capital regulation.
Subjects: 
Default risk
Financial frictions
macroprudential policy
JEL: 
E3
E44
G01
G21
ISBN: 
978-92-899-1640-0
Document Type: 
Working Paper

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