BIS paper models self-generating financial crises
Financial cycle can endogenously create a banking collapse
A group of economists has built a structural model of the economy that generates credit booms and busts without the need for external shocks, which they hope can form the basis for future research.
Published on February 17 as a Bank for International Settlements (BIS) working paper, the research by Frédéric Boissay, Fabrice Collard and Frank Smets sets out a stylised dynamic stochastic general equilibrium (DSGE) model where the financial cycle can drive crises.
The authors aim to go beyond
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