Replication data for: A Macroeconomic Model with a Financial Sector

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Project Citation:

Brunnermeier, Markus K., and Sannikov, Yuliy. Replication data for: A Macroeconomic Model with a Financial Sector. Nashville, TN: American Economic Association [publisher], 2014. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-10-11. https://doi.org/10.3886/E112732V1

Project Description

Summary: This article studies the full equilibrium dynamics of an economy with financial frictions. Due to highly nonlinear amplification effects, the economy is prone to instability and occasionally enters volatile crisis episodes. Endogenous risk, driven by asset illiquidity, persists in crisis even for very low levels of exogenous risk. This phenomenon, which we call the volatility paradox, resolves the Kocherlakota (2000) critique. Endogenous leverage determines the distance to crisis. Securitization and derivatives contracts that improve risk sharing may lead to higher leverage and more frequent crises.

Scope of Project

JEL Classification:
      E13 General Aggregative Models: Neoclassical
      E32 Business Fluctuations; Cycles
      E44 Financial Markets and the Macroeconomy
      E52 Monetary Policy
      G01 Financial Crises
      G12 Asset Pricing; Trading Volume; Bond Interest Rates
      G20 Financial Institutions and Services: General

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V1 [2019-10-11]

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