Working Paper
Understanding Bank and Nonbank Credit Cycles: A Structural Exploration
Abstract: We explore the structural drivers of bank and nonbank credit cycles using an estimated medium-scale macro model that allows for bank and nonbank financial intermediation. We posit economy-wide aggregate and sectoral disturbances to potentially drive bank and nonbank credit growth. We find that sectoral shocks affecting the balance sheets of entrepreneurs who borrow from the financial sector are important for the business cycle frequency fluctuations in bank and nonbank credit growth. Economy-wide entrepreneurial risk shocks gain predominance for explaining the longer-horizon comovement between the two series.
Keywords: Banks; Capital Requirements; Credit Cycles; DSGE Models; Leverage; Nonbanks;
JEL Classification: G01; G21; E44; E3;
https://doi.org/10.17016/FEDS.2019.031
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Bibliographic Information
Provider: Board of Governors of the Federal Reserve System (U.S.)
Part of Series: Finance and Economics Discussion Series
Publication Date: 2019-05-03
Number: 2019-031
Pages: 55 pages