ECB researchers model systemic crises with heterogeneous interbank market


Systemic banking crises (SBCs) typically break out in the midst of credit booms generated by a sequence of positive supply shocks rather than a big negative wealth shock, according to the findings of a new working paper published by the European Central Bank (ECB).

The paper – Booms and Systemic Banking Crises, by Frederic Boissay, Fabrice Collard and Frank Smets – uses a dynamic general equilibrium model featuring a non-trivial banking sector made up of banks with heterogeneous intermediation

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