A Macroeconomic Model with Financially Constrained Producers and Intermediaries

70 Pages Posted: 11 Sep 2017

See all articles by Vadim Elenev

Vadim Elenev

Johns Hopkins Carey Business School

Tim Landvoigt

University of Pennsylvania - The Wharton School; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR)

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business; National Bureau of Economic Research (NBER); Centre for Economic Policy Research (CEPR); New York University Stern School of Business, Department of Finance

Multiple version iconThere are 3 versions of this paper

Date Written: September 2017

Abstract

We propose a model that can simultaneously capture the sharp and persistent drop in macro-economic aggregates and the sharp change in credit spreads observed in the U.S. during the Great Recession. The model features financial intermediaries that make long-term defaultable loans to producers and raise short-term debt from savers. Intermediaries are subject to a regulatory equity capital constraint. Policies limiting intermediary leverage redistribute wealth from savers to equity owners of producers and intermediaries. The benefits of lower intermediary leverage for financial stability are offset by the costs from lower output. Current capital requirements are close to optimal.

Keywords: credit spread, Financial Intermediation, intermediary-based asset pricing, macroprudential policy

JEL Classification: F31, G12, G15

Suggested Citation

Elenev, Vadim and Landvoigt, Tim and Van Nieuwerburgh, Stijn, A Macroeconomic Model with Financially Constrained Producers and Intermediaries (September 2017). CEPR Discussion Paper No. DP12282. Available at SSRN: https://ssrn.com/abstract=3035277

Vadim Elenev (Contact Author)

Johns Hopkins Carey Business School ( email )

100 International Drive
Baltimore, MD 20036-1984
United States

Tim Landvoigt

University of Pennsylvania - The Wharton School ( email )

3641 Locust Walk
Philadelphia, PA 19104-6365
United States

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

Stijn Van Nieuwerburgh

Columbia University Graduate School of Business ( email )

3022 Broadway
Uris Hall 809
New York, NY New York 10027
United States

HOME PAGE: http://https://www0.gsb.columbia.edu/faculty/svannieuwerburgh/

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Centre for Economic Policy Research (CEPR)

London
United Kingdom

New York University Stern School of Business, Department of Finance ( email )

44 West 4th Street
Suite 9-190
New York, NY 10012-1126
United States

Register to save articles to
your library

Register

Paper statistics

Downloads
0
Abstract Views
285
PlumX Metrics