International Finance Discussion Papers (IFDP)

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December 2017

A Macroeconomic Model with Financial Panics

Mark Gertler, Nobuhiro Kiyotaki, and Andrea Prestipino

Abstract:

This paper incorporates banks and banking panics within a conventional macroeconomic framework to analyze the dynamics of a financial crisis of the kind recently experienced. We are particularly interested in characterizing the sudden and discrete nature of the banking panics as well as the circumstances that makes an economy vulnerable to such panics in some instances but not in others. Having a conventional macroeconomic model allows us to study the channels by which the crisis affects real activity and the effects of policies in containing crises.

DOI: https://doi.org/10.17016/IFDP.2017.1219

PDF: Full Paper

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Last Update: January 09, 2020