A Macroeconomic Model with Financial Panics

Gertler, Mark; Kiyotaki, Nobuhiro; Prestipino, Andrea

doi:10.17016/IFDP.2017.1219

Working Paper

A Macroeconomic Model with Financial Panics

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.

Keywords: Bank Runs; Financial Crisis; New Keynesian DSGE;

JEL Classification: E23; E32; E44; G01; G21; G33;

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