Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises

Mark Gertler, N. Kiyotaki, A. Prestipino

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Abstract

    There has been considerable progress in developing macroeconomic models of banking crises. However, most of this literature focuses on the retail sector where banks obtain deposits from households. In fact, the recent financial crisis that triggered the Great Recession featured a disruption of wholesale funding markets, where banks lend to one another. Accordingly, to understand the financial crisis as well as to draw policy implications, it is essential to capture the role of wholesale banking. The objective of this chapter is to characterize a model that can be seen as a natural extension of the existing literature, but in which the analysis is focused on wholesale funding markets. The model accounts for both the buildup and collapse of wholesale banking and also sketches out the transmission of the crises to the real sector. We also draw out the implications of possible instability in the wholesale banking sector for lender-of-last resort policy as well as for macroprudential policy.

    Original languageEnglish (US)
    Title of host publicationHandbook of Macroeconomics, 2016
    PublisherElsevier B.V.
    Pages1345-1425
    Number of pages81
    Volume2
    ISBN (Print)9780444594877
    DOIs
    StatePublished - 2016

    Publication series

    NameHandbook of Macroeconomics
    Volume2
    ISSN (Print)15740048

    Fingerprint

    Financial crisis
    Banking
    Bank runs
    Macroeconomic modelling
    Funding
    Disruption
    Banking sector
    Policy implications
    Macroeconomic models
    Lender of last resort
    Household
    Retail sector
    Banking crisis
    Great Recession
    Bank deposits
    Real sector

    Keywords

    • Financial crises
    • Interbank markets
    • Rollover risk
    • Wholesale banking

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Economics, Econometrics and Finance (miscellaneous)

    Cite this

    Gertler, M., Kiyotaki, N., & Prestipino, A. (2016). Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises. In Handbook of Macroeconomics, 2016 (Vol. 2, pp. 1345-1425). (Handbook of Macroeconomics; Vol. 2). Elsevier B.V.. https://doi.org/10.1016/bs.hesmac.2016.03.009

    Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises. / Gertler, Mark; Kiyotaki, N.; Prestipino, A.

    Handbook of Macroeconomics, 2016. Vol. 2 Elsevier B.V., 2016. p. 1345-1425 (Handbook of Macroeconomics; Vol. 2).

    Research output: Chapter in Book/Report/Conference proceedingChapter

    Gertler, M, Kiyotaki, N & Prestipino, A 2016, Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises. in Handbook of Macroeconomics, 2016. vol. 2, Handbook of Macroeconomics, vol. 2, Elsevier B.V., pp. 1345-1425. https://doi.org/10.1016/bs.hesmac.2016.03.009
    Gertler M, Kiyotaki N, Prestipino A. Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises. In Handbook of Macroeconomics, 2016. Vol. 2. Elsevier B.V. 2016. p. 1345-1425. (Handbook of Macroeconomics). https://doi.org/10.1016/bs.hesmac.2016.03.009
    Gertler, Mark ; Kiyotaki, N. ; Prestipino, A. / Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises. Handbook of Macroeconomics, 2016. Vol. 2 Elsevier B.V., 2016. pp. 1345-1425 (Handbook of Macroeconomics).
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