Aftermath of Banking Crises: Effectson Real and Monetary Variables

In this paper a simple optimizing model is developed to analyze the implications of a banking crisis. Banks are incorporated by assuming that they intermediate funds between firms and households. It is shown that when depositors perceive the quality of deposits to have deteriorated, they switch from...

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Bibliographic Details
Main Author: Gupta, Poonam (Author)
Format: Electronic eBook
Language:English
Published: Washington, D.C International Monetary Fund 2000
Series:IMF Working Papers Working Paper No. 00/96
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Summary:In this paper a simple optimizing model is developed to analyze the implications of a banking crisis. Banks are incorporated by assuming that they intermediate funds between firms and households. It is shown that when depositors perceive the quality of deposits to have deteriorated, they switch from deposits to cash. Because of the higher cost of liquidity, consumption, M2 and the M2 multiplier decline, interest rates on deposits and loans increase and output contracts. The findings of the paper match the key stylized facts of banking crises
Physical Description:1 Online-Ressource (25 p)
ISBN:1451851901
9781451851908

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