European Parliament Library

Financial Crises in DSGE Models :, Selected Applications of MAPMOD, Jaromir Benes, Michael Kumhof, Douglas Laxton

This paper, together with a technical companion paper, presents MAPMOD, a new IMF model designed to study vulnerabilities associated with excessive credit expansions, and to support macroprudential policy analysis. In MAPMOD, bank loans create purchasing power that facilitates adjustments in the real economy. But excessively large and risky loans can impair balance sheets and sow the seeds of a financial crisis. Banks respond to losses through higher spreads and rapid credit cutbacks, with adverse effects for the real economy. These features allow the model to capture the basic facts of both the pre-crisis and crisis phases of financial cycles
Table Of Contents
Cover; Contents; I. Introduction; II. Modeling Philosophy and Key Design Features of MAPMOD; III. Examples of Good and Bad Credit Expansions; A. Revisions in Views About Trend Productivity Growth; B. Underpricing of Lending Risk by Banks ("NINJA Loans" Shock); C. Excessive Credit Expansion Caused by an Asset Price Bubble; IV. Nonlinearities, Leverage, and Macroprudential Policy; A. Financial Sector Vulnerabilities and Financial Crises; B. Nonlinear versus Linear Simulations; C. Countercyclical Macroprudential Policy; V. Other Shocks in Domestic and International Financial Markets
Literary Form
non fiction
Description based upon print version of record
Physical Description
1 online resource (56 p.)
Specific Material Designation
Form Of Item

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