Banks' Precautionary Capital and Credit Crunches /

Banks' Precautionary Capital and Credit Crunches /

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Bibliographic Details
Author / Creator:	Valencia, Fabian.
Imprint:	Washington, D.C. : International Monetary Fund, 2008.
Description:	1 online resource (35 pages)
Language:	English
Subject:	Financial crises -- United States -- Econometric models. Bank capital -- United States -- Econometric models. Bank failures -- United States -- Econometric models. Credit -- United States -- Econometric models. Risk -- United States -- Econometric models. Bank capital -- Econometric models. Bank failures -- Econometric models. Credit -- Econometric models. Financial crises -- Econometric models. Risk -- Econometric models. United States.
Format:	E-Resource Book
URL for this record:	http://pi.lib.uchicago.edu/1001/cat/bib/12501085

Hidden Bibliographic Details
Other uniform titles:	IMF eLibrary.
Other authors / contributors:	Valencia, Fabian. International Monetary Fund.
ISBN:	1451915594 9781451915594 9781451871067 1451871066 9781451915594
Notes:	Available in PDF, ePUB, and Mobi formats on the Internet.
Summary:	Periods of banking distress are often followed by sizable and long-lasting contractions in bank credit. They may be explained by a declined demand by financially impaired borrowers (the conventional financial accelerator) or by lower supply by capital-constrained banks, a "credit crunch". This paper develops a bank model to study credit crunches and their real effects. In this model, banks maintain a precautionary level of capital that serves as a smoothing mechanism to avert disruptions in the supply of credit when hit by small shocks. However, for larger shocks, highly persistent credit crunches may arise even when the impulse is a one time, non-serially correlated event. From a policy perspective, the model justifies the use of public funds to recapitalize banks following a significant deterioration in their capital position.

Description
Summary:	Periods of banking distress are often followed by sizable and long-lasting contractions in bank credit. They may be explained by a declined demand by financially impaired borrowers (the conventional financial accelerator) or by lower supply by capital-constrained banks, a "credit crunch". This paper develops a bank model to study credit crunches and their real effects. In this model, banks maintain a precautionary level of capital that serves as a smoothing mechanism to avert disruptions in the supply of credit when hit by small shocks. However, for larger shocks, highly persistent credit crunches may arise even when the impulse is a one time, non-serially correlated event. From a policy perspective, the model justifies the use of public funds to recapitalize banks following a significant deterioration in their capital position.
Item Description:	Available in PDF, ePUB, and Mobi formats on the Internet.
Physical Description:	1 online resource (35 pages)
ISBN:	1451915594 9781451915594 9781451871067 1451871066