Bank Capital, Agency Costs, and Monetary Policy

نویسنده

  • Kevin Moran
چکیده

Evidence suggests that banks, like firms, face financial frictions when raising funds. The authors develop a quantitative, monetary business cycle model in which agency problems affect both the relationship between banks and firms and the relationship between banks and their depositors. As a result, bank capital and entrepreneurial net worth jointly determine aggregate investment, and are important determinants of the propagation of shocks. The authors find that the effects of monetary policy and technology shocks are dampened but more persistent in their model than in an economy where the information friction that banks face is reduced or eliminated. After documenting that the bank capital-asset ratio is countercyclical in the data, the authors show that their model, in which movements in this ratio are marketdetermined, can replicate the countercyclical ratio. JEL classification: E44, E52, G21 Bank classification: Business fluctuations and cycles; Financial institutions; Transmission of monetary policy

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تاریخ انتشار 2000