Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/227867
Authors: 
Mikkelsen, Jakob Guldbæk
Poeschl, Johannes
Year of Publication: 
2020
Series/Report no.: 
Danmarks Nationalbank Working Papers No. 149
Publisher: 
Danmarks Nationalbank, Copenhagen
Abstract: 
We show that systemic risk in the banking sector breeds macroeconomic uncertainty. We develop a model of a production economy with a banking sector where financial constraints of banks can lead to disastrous banking panics. We find that a higher probability of a banking panic increases uncertainty in the aggregate economy. We explore the implications of this banking panic-driven uncertainty for business cycles, asset prices and macroprudential regulation. Banking panic-driven uncertainty amplifies business cycle volatility and increases risk premia on asset prices. A countercyclical capital buffer lowers both the probability of banking panics and aggregate uncertainty.
Subjects: 
Banking Panics
Systemic Risk
Endogenous Uncertainty
Macroprudential Policy
JEL: 
E44
G12
G21
G28
Document Type: 
Working Paper

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