Replication data for: A Macroeconomic Framework for Quantifying Systemic Risk
Principal Investigator(s): View help for Principal Investigator(s) Zhiguo He; Arvind Krishnamurthy
Version: View help for Version V1
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LICENSE.txt | text/plain | 14.6 KB | 12/07/2019 09:50:AM |
Project Citation:
He, Zhiguo, and Krishnamurthy, Arvind. Replication data for: A Macroeconomic Framework for Quantifying Systemic Risk. Nashville, TN: American Economic Association [publisher], 2019. Ann Arbor, MI: Inter-university Consortium for Political and Social Research [distributor], 2019-12-07. https://doi.org/10.3886/E116420V1
Project Description
Summary:
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Systemic risk arises when shocks lead to states where a disruption in financial intermediation adversely affects the economy and feeds back into further disrupting financial intermediation. We present a macroeconomic model with a financial intermediary sector subject to an equity capital constraint. The novel aspect of our analysis is that the model produces a stochastic steady state distribution for the economy, in which only some of the states correspond to systemic risk states. The model allows us to examine the transition from "normal" states to systemic risk states. We calibrate our model and use it to match the systemic risk apparent during the 2007/2008 financial crisis. We also use the model to compute the conditional probabilities of arriving at a systemic risk state, such as 2007/2008. Finally, we show how the model can be used to conduct a macroeconomic "stress test" linking a stress scenario to the probability of systemic risk states.
Scope of Project
JEL Classification:
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E13 General Aggregative Models: Neoclassical
E44 Financial Markets and the Macroeconomy
E52 Monetary Policy
G01 Financial Crises
G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
G28 Financial Institutions and Services: Government Policy and Regulation
E13 General Aggregative Models: Neoclassical
E44 Financial Markets and the Macroeconomy
E52 Monetary Policy
G01 Financial Crises
G21 Banks; Depository Institutions; Micro Finance Institutions; Mortgages
G28 Financial Institutions and Services: Government Policy and Regulation
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