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- ISIDORE Id: 10670/1.22f10a...
- hal: hal-03346173
- doi: 10.1016/j.euroecorev.2020.103630
- WOS: 000617819500020
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info:eu-repo/semantics/altIdentifier/doi/10.1016/j.euroecorev.2020.103630
info:eu-repo/semantics/OpenAccess
Mots-clés
Real Business Cycle model Default Financial frictions Asymmetry Optimal regulation E - Macroeconomics and Monetary Economics/E.E3 - Prices, Business Fluctuations, and Cycles/E.E3.E32 - Business Fluctuations • Cycles E - Macroeconomics and Monetary Economics/E.E4 - Money and Interest Rates/E.E4.E44 - Financial Markets and the Macroeconomy G - Financial Economics/G.G2 - Financial Institutions and Services/G.G2.G21 - Banks • Depository Institutions • Micro Finance Institutions • MortgagesSujets proches
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Patrick Fève et al., « Costly default and skewed business cycle », HAL SHS (Sciences de l’Homme et de la Société), ID : 10.1016/j.euroecorev.2020.103630
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Résumé
We augment a simple Real Business Cycle model with financial intermediaries that may default on their liabilities and a financial friction generating social costs of default. We derive a closed-form solution for the general equilibrium of the economy, providing analytical results. Endogenous default generates a negative skew for aggregate variables and a positive skew for credit spreads, as documented in the empirical literature. Larger financial frictions strengthen asymmetry, which amplifies the welfare cost of fluctuations. Macro-prudential regulation alleviates both the cost of fluctuations and business-cycle asymmetry, at the expense of a steady-state distortion. Finally, we prove analytically the existence of an optimal level of regulation, which increases with the size of the financial friction.
