Bank assets, liquidity and credit cycles

Publikation: Bidrag til tidsskriftTidsskriftartikelfagfællebedømt

Standard

Bank assets, liquidity and credit cycles. / Lubello, Federico ; Petrella, Ivan; Santoro, Emiliano.

I: Journal of Economic Dynamics and Control, Bind 105, 08.2019, s. 265-282.

Publikation: Bidrag til tidsskriftTidsskriftartikelfagfællebedømt

Harvard

Lubello, F, Petrella, I & Santoro, E 2019, 'Bank assets, liquidity and credit cycles', Journal of Economic Dynamics and Control, bind 105, s. 265-282. https://doi.org/10.1016/j.jedc.2019.06.003

APA

Lubello, F., Petrella, I., & Santoro, E. (2019). Bank assets, liquidity and credit cycles. Journal of Economic Dynamics and Control, 105, 265-282. https://doi.org/10.1016/j.jedc.2019.06.003

Vancouver

Lubello F, Petrella I, Santoro E. Bank assets, liquidity and credit cycles. Journal of Economic Dynamics and Control. 2019 aug.;105:265-282. https://doi.org/10.1016/j.jedc.2019.06.003

Author

Lubello, Federico ; Petrella, Ivan ; Santoro, Emiliano. / Bank assets, liquidity and credit cycles. I: Journal of Economic Dynamics and Control. 2019 ; Bind 105. s. 265-282.

Bibtex

@article{f504af845e1247ec8cfc419f3377872b,
title = "Bank assets, liquidity and credit cycles",
abstract = "We study how bank collateral assets and their pledgeability affect the amplitude of credit cycles. To this end, we develop a tractable model where bankers intermediate funds between savers and borrowers. If bankers default, savers acquire the right to liquidate bankers{\textquoteright} assets. However, due to the vertically integrated structure of our credit economy, savers anticipate that liquidating financial assets (i.e., loans) is conditional on borrowers being solvent on their debt obligations. This friction limits the collateralization of bankers{\textquoteright} financial assets beyond that of real assets (i.e., capital). In this context, increasing the pledgeability of financial assets eases more credit and reduces the spread between the loan and the deposit rate, thus attenuating capital misallocation as it typically emerges in credit economies {\`a} la Kiyotaki and Moore (1997). We uncover a close connection between the collateralization of bank loans, macroeconomic amplification and the degree of procyclicality of bank leverage.",
keywords = "Faculty of Social Sciences, Banking, Bank collateral, Liquidity, Capital misallocation, Macroprudential policy",
author = "Federico Lubello and Ivan Petrella and Emiliano Santoro",
year = "2019",
month = aug,
doi = "10.1016/j.jedc.2019.06.003",
language = "English",
volume = "105",
pages = "265--282",
journal = "Journal of Economic Dynamics and Control",
issn = "0165-1889",
publisher = "Elsevier",

}

RIS

TY - JOUR

T1 - Bank assets, liquidity and credit cycles

AU - Lubello, Federico

AU - Petrella, Ivan

AU - Santoro, Emiliano

PY - 2019/8

Y1 - 2019/8

N2 - We study how bank collateral assets and their pledgeability affect the amplitude of credit cycles. To this end, we develop a tractable model where bankers intermediate funds between savers and borrowers. If bankers default, savers acquire the right to liquidate bankers’ assets. However, due to the vertically integrated structure of our credit economy, savers anticipate that liquidating financial assets (i.e., loans) is conditional on borrowers being solvent on their debt obligations. This friction limits the collateralization of bankers’ financial assets beyond that of real assets (i.e., capital). In this context, increasing the pledgeability of financial assets eases more credit and reduces the spread between the loan and the deposit rate, thus attenuating capital misallocation as it typically emerges in credit economies à la Kiyotaki and Moore (1997). We uncover a close connection between the collateralization of bank loans, macroeconomic amplification and the degree of procyclicality of bank leverage.

AB - We study how bank collateral assets and their pledgeability affect the amplitude of credit cycles. To this end, we develop a tractable model where bankers intermediate funds between savers and borrowers. If bankers default, savers acquire the right to liquidate bankers’ assets. However, due to the vertically integrated structure of our credit economy, savers anticipate that liquidating financial assets (i.e., loans) is conditional on borrowers being solvent on their debt obligations. This friction limits the collateralization of bankers’ financial assets beyond that of real assets (i.e., capital). In this context, increasing the pledgeability of financial assets eases more credit and reduces the spread between the loan and the deposit rate, thus attenuating capital misallocation as it typically emerges in credit economies à la Kiyotaki and Moore (1997). We uncover a close connection between the collateralization of bank loans, macroeconomic amplification and the degree of procyclicality of bank leverage.

KW - Faculty of Social Sciences

KW - Banking

KW - Bank collateral

KW - Liquidity

KW - Capital misallocation

KW - Macroprudential policy

U2 - 10.1016/j.jedc.2019.06.003

DO - 10.1016/j.jedc.2019.06.003

M3 - Journal article

VL - 105

SP - 265

EP - 282

JO - Journal of Economic Dynamics and Control

JF - Journal of Economic Dynamics and Control

SN - 0165-1889

ER -

ID: 222970463