Munich Personal RePEc Archive

Banking Panic Risk and Macroeconomic Uncertainty

Mikkelsen, Jakob and Poeschl, Johannes (2019): Banking Panic Risk and Macroeconomic Uncertainty.

This is the latest version of this item.

[img]
Preview
PDF
MPRA_paper_98960.pdf

Download (3MB) | Preview

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.

Available Versions of this Item

UB_LMU-Logo
MPRA is a RePEc service hosted by
the Munich University Library in Germany.