This paper argues that counter-cyclical liquidity hoarding by financial intermediaries may strongly amplify business cycles. It develops a dynamic stochastic general equilibrium model in which banks operate subject to agency problems and funding liquidity risk in their inter- mediation activity....

This paper argues that counter-cyclical liquidity hoarding by financial intermediaries may strongly amplify business cycles. It develops a dynamic stochastic general equilibrium model in which banks operate subject to agency problems and funding liquidity risk in their inter- mediation activity....

The credit boom prevailing in the period preceding the last financial crisis was prolonged and associated with neither particularly strong output growth nor rising inflation in economies in which it occurred. This type of credit cycle and financial cycle is hard to reconcile with existing...

This paper studies loan activity in a context where banks must follow Basel Accord-type rules and acquire financing from households. Loan activity typically decreases when entrepreneurs' investment returns decline, and we study which type of policy could revigorate an economy in a trough. We...

This paper argues that counter-cyclical liquidity hoarding by financial intermediaries may strongly amplify business cycles. It develops a dynamic stochastic general equilibrium model in which banks operate subject to financial frictions and idiosyncratic funding liquidity risk in their...

This paper studies loan activity in a context where banks must follow Basel Accord-type rules and acquire financing from households. Loan activity typically decreases when entrepreneurs’ investment returns decline, and we study which type of policy could revigorate an economy in a trough. We...

The recent fi nancial crisis revealed several flaws in both monetary and fi nancial regulation. Contrary to what was believed, price stability is not a suffi cient condition for financial stability. At the same time, micro-prudential regulation alone becomes insu fficient to ensure the financial...