Mikkelsen, Jakob and Poeschl, Johannes (2019): Banking Panic Risk and Macroeconomic Uncertainty.
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Abstract
We show that systemic risk in the banking sector breeds macroeconomic uncertainty. In a production economy with a banking sector, 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, increases risk premia on asset prices and yields a new benefit from countercyclical bank capital buffers.
Item Type: | MPRA Paper |
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Original Title: | Banking Panic Risk and Macroeconomic Uncertainty |
Language: | English |
Keywords: | Banking Panics, Systemic Risk, Endogenous Uncertainty, Macroprudential Policy |
Subjects: | E - Macroeconomics and Monetary Economics > E4 - Money and Interest Rates > E44 - Financial Markets and the Macroeconomy G - Financial Economics > G1 - General Financial Markets > G12 - Asset Pricing ; Trading Volume ; Bond Interest Rates G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks ; Depository Institutions ; Micro Finance Institutions ; Mortgages G - Financial Economics > G2 - Financial Institutions and Services > G28 - Government Policy and Regulation |
Item ID: | 94729 |
Depositing User: | Johannes Poeschl |
Date Deposited: | 28 Jun 2019 09:11 |
Last Modified: | 26 Sep 2019 11:39 |
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URI: | https://mpra.ub.uni-muenchen.de/id/eprint/94729 |
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