TY  - JOUR
CY  - Dordrecht
ID  - publications47322
UR  - http://tse-fr.eu/pub/128013
A1  - Gersbach, Hans
A1  - Rochet, Jean-Charles
A1  - Scheffel, Martin
Y1  - 2022/09/08/
N2  - We integrate bank and bond financing into a two-sector neoclassical growth model and identify an automatic stabilization effect due to endogenous bank leverage adjustment. We show that although bank leverage amplifies shocks, the increase of leverage due to a decline in bank equity partially offsets the post crisis decline of bank lending and accelerates economic recovery by reducing the persistence of the bank lending channel. In this case, endogenous leverage adjustment is an automatic stabilizer. Regulatory state-independent capital limits and wage rigidities impair the re-allocation of capital between sectors and weaken this automatic stabilization. A quantitative analysis of the US during the Great Recession shows that the magnitude of automatic stabilization can be significant and informs about potentially high costs of strict capital regulation or wage rigidities during banking crises.
PB  - Kluwer
JF  - Review of Finance
KW  - Financial intermediation
KW  - capital accumulation
KW  - banking crisis
KW  - macroeconomic shocks
KW  - business cycles
KW  - bust-boom cycles
KW  - managing recoveries
SN  - 1572-3097
TI  - Financial Intermediation, Capital Accumulation, and Crisis Recovery
AV  - none
ER  -