Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/202973 
Year of Publication: 
2017
Series/Report no.: 
Working Paper No. 1719
Publisher: 
Koç University-TÜSİAD Economic Research Forum (ERF), Istanbul
Abstract: 
This paper surveys the theoretical and empirical literature on the macroeconomic implications of financial imperfections. It focuses on two major channels through which financial imperfections can affect macroeconomic outcomes. The first channel, which operates through the demand side of finance and is captured by financial accelerator-type mechanisms, describes how changes in borrowers' balance sheets can affect their access to finance and thereby amplify and propagate economic and financial shocks. The second channel, which is associated with the supply side of finance, emphasises the implications of changes in financial intermediaries' balance sheets for the supply of credit, liquidity and asset prices, and, consequently, for macroeconomic outcomes. These channels have been shown to be important in explaining the linkages between the real economy and the financial sector. That said, many questions remain.
Subjects: 
Asset prices
balance sheets
credit
financial accelerator
financial intermediation
financial linkages
international linkages
leverage
liquidity
macro-financial linkages
output
real-financial linkages
JEL: 
D53
E21
E32
E44
E51
F36
F44
F65
G01
G10
G12
G14
G15
G21
Document Type: 
Working Paper

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