CHAINED CREDIT CONTRACTS AND FINANCIAL ACCELERATORS
Copyright policy )CHAINED CREDIT CONTRACTS AND FINANCIAL ACCELERATORS
Sufficiently high net worth of financial intermediaries (FIs) is considered a necessary condition for financial and macroeconomic stability. In this paper, we explore why the net worth of FIs is important as compared to that of nonfinancial firms using a dynamic general equilibrium model, in which both FIs and nonfinancial firms rely on costly external debt. We find that an exogenous disruption of the FIs' net worth has a greater aggregate impact than does the same‐sized disruption of the nonfinancial firms' net worth. The key reason is that the net worth of the FIs in the United States is small. (JEL E22, E44, G21)
- Tokyo University of Science Japan
- Waseda University Japan
- Bank of Japan Japan
Chain of Credit Contracts, Net Worth of Financial Intermediaries, Cross-sectional Net Worth Distribution, Financial Accelerator effect, jel: jel:E22, jel: jel:E44
Chain of Credit Contracts, Net Worth of Financial Intermediaries, Cross-sectional Net Worth Distribution, Financial Accelerator effect, jel: jel:E22, jel: jel:E44
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