Financial crises, bank risk exposure and government financial policy

Mark Gertler, Nobuhiro Kiyotaki, Albert Queralto

    Research output: Contribution to journalArticle

    Abstract

    A macroeconomic model with financial intermediation is developed in which the intermediaries (banks) can issue outside equity as well as short term debt. This makes bank risk exposure an endogenous choice. The goal is to have a model that can not only capture a crisis when banks are highly vulnerable to risk, but can also account for why banks adopt such a risky balance sheet in the first place. We use the model to assess quantitatively how perceptions of fundamental risk and of government credit policy in a crisis affect the vulnerability of the financial system ex ante. We also study the effects of macro-prudential policies designed to offset the incentives for risk-taking.

    Original languageEnglish (US)
    JournalJournal of Monetary Economics
    Volume59
    Issue numberSUPPL.
    DOIs
    StatePublished - Dec 15 2012

    Fingerprint

    Government
    Financial crisis
    Financial policy
    Risk exposure
    Bank risk
    Risk taking
    Balance sheet
    Intermediaries
    Macroeconomic models
    Financial system
    Financial intermediation
    Equity
    Incentives
    Bank crises
    Credit policy
    Vulnerability
    Short-term debt

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Finance

    Cite this

    Financial crises, bank risk exposure and government financial policy. / Gertler, Mark; Kiyotaki, Nobuhiro; Queralto, Albert.

    In: Journal of Monetary Economics, Vol. 59, No. SUPPL., 15.12.2012.

    Research output: Contribution to journalArticle

    Gertler, Mark ; Kiyotaki, Nobuhiro ; Queralto, Albert. / Financial crises, bank risk exposure and government financial policy. In: Journal of Monetary Economics. 2012 ; Vol. 59, No. SUPPL.
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