Liquidation, Asset Prices and the Recycling Channel of Bank Lending
نویسنده
چکیده
This paper investigates the e¤ects on the asset market of bank actions in dealing with their non-performing loans. It is demonstrated that liquidation of bad loans may not be as detrimental to asset prices as commonly argued, because funds recouped from liquidation can be recycled into new loans which support the asset market. While capital regulation protects the health of banks, it may limit the amount of liquidation in some circumstances and hence reduce the impact of the recycling channel. This supports the idea that varying capital requirements countercyclically can dampen the economic cycle, notwithstanding the problems with making this a tool for economic management. JEL classi cation: E44, G21, G33, G38
منابع مشابه
Tropical Bubbles : Asset Prices in Latin America , 1980 - 2001 1 Santiago
In this paper we test for the existence of asset price bubbles in Latin America in the 19802001 period, focusing mainly on stock prices. Based on unit root and cointegration tests we cannot reject the hypothesis of bubbles. We arrive at the same conclusion using Froot and Obstfeld’s intrinsic bubbles model. We identify periods of significant stock price overvaluation to examine empirical regula...
متن کاملبررسی تأثیر کانال قیمت داراییها در اثرگذاری سیاست پولی در ایران مطالعه موردی: شاخص قیمت مسکن.
The aim of this paper is to consider the effects of monetary policy on production and prices through asset price channel (the housing price index) in Iran during 1368Q1 to 1387Q4. By Vector Error Correction (VEC) Model, the effect of monetary policy has been considered through this channel. In general, the results show that the debt of banks to the central bank as instruments of monetary policy...
متن کاملA Study on the Effect of Granular Residual in the Banking Network on the Transmission of Monetary Policy through Lending Channel
Granular residual is created in the banking network when there are a few large banks with many small banks. In this case, the effect of the shocks on each bank not lost in total that can lead to macro-economic consequences. The transmission of monetary policy through change in bank facilities is one of the key mechanisms affecting monetary policies. The power of transmission of monetary policy ...
متن کاملAsset Pricing and Bank Lending Equilibrium with Collateral--university of Melb preserntation.dvi
While much of the existing financial literature on asset pricing and corporate finance assumes an exogenous lending market, this paper studies an endogenous one in a general equilibrium model. To achieve this, a natural instrument is collateral, because its value is associated with the conditional liquidation price. In the economy, all agents are endowed with a collateralizable asset and cash, ...
متن کاملDo Asset Price Bubbles have Negative Real Effects?
In the recent recession and current economic recovery, policymakers have supported asset prices in the U.S. treasury and mortgage markets, expecting that improvement in the balance sheet of banks will lead to more commercial lending. In general, we document that increases in housing prices in a bank’s deposit base lead banks to decrease commercial lending. Further, we find that a one-standard d...
متن کامل