We introduce a dynamic banking-macro model, which abstains from conventional mean-reversion assumptions and in which - similar to Brunnermeier and Sannikov (2010) - adverse asset-price movements and their impact on risk premia and credit spreads can induce instabilities in the banking sector. To...

We introduce a dynamic banking-macro model, which abstains from conventional mean-reversion assumptions and in which - similar to Brunnermeier and Sannikov (2010) - adverse asset-price movements and their impact on risk premia and credit spreads can induce instabilities in the banking sector. To...

This paper introduces a Banking-Macro Model and estimates the linkages through a Multi-Regime VAR (MRVAR). We introduce a dynamic model which is akin to the Brunnermeier and Sannikov (BS) model (2010). The banking sector is exposed to instability due to adverse movements of asset prices and...