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:
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.

MARC

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520 |a 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. 
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650 0 |a Credit  |z United States  |x Econometric models. 
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