Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/212350
Authors: 
Haavio, Markus
Ripatti, Antti
Takalo, Tuomas
Year of Publication: 
2016
Series/Report no.: 
Bank of Finland Research Discussion Papers No. 12/2016
Publisher: 
Bank of Finland, Helsinki
Abstract: 
​We build a dynamic stochastic general equilibrium model, where the balance sheets of both banks and non-financial firms play a role in macro-financial linkages. We show that in equilibrium bank capital tends to be scarce, compared with firm capital. We study public funding of banks and firms in times of crisis. Government capital injections can be useful as a shock cushion, but they distort incentives. Small capital injections benefit banks more than firms but the relative benefit is declining in the injection size. Government should first recapitalize banks, and if resources are large enough, lend to firms too.
JEL: 
E44
G21
G28
G38
Persistent Identifier of the first edition: 
ISBN: 
978-952-323-107-8
Document Type: 
Working Paper

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