NDLI: Subprime Mortgages and Banking in a DSGE Model

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Subprime Mortgages and Banking in a DSGE Model

Content Provider	Scilit
Author	Ricci, Martino N. Tirelli, Patrizio
Copyright Year	2017
Description	Journal: SSRN Electronic Journal Can a DSGE model replicate the financial crisis effects without assuming unprecedented and implausibly large shocks? Starting from the assumption that the subprime crisis triggered the financial crisis, we introduce balance-sheet effects for housing market borrowers and for commercial banks in an otherwise standard DSGE model. Our crisis experiment is initiated by a shock to subprime lending risk, which is calibrated to match the observed increase in subprime delinquency rates. Due to contagion of prime borrowers and to the ensuing adverse effect on banks balance sheets, this apparently small shock is sufficient to trigger a decline in housing investment comparable to what was observed during the financial crisis. The adverse effect of sub-primers risk on commercial banks’ agency problem is a crucial driver of our results.
Related Links	https://research-repository.griffith.edu.au/bitstream/handle/10072/390479/2017-09-subprime-mortgages-banking-in-DSGE-model.pdf https://papers.ssrn.com/sol3/Delivery.cfm?abstractid=2991333
ISSN	10914358
e-ISSN	15565068
DOI	10.2139/ssrn.2991333
Journal	SSRN Electronic Journal
Language	English
Publisher	Elsevier BV
Publisher Date	2017-06-22
Access Restriction	Open
Subject Keyword	Journal: SSRN Electronic Journal History and Philosophy of Science Financial Crisis Dsge Model
Content Type	Text
Resource Type	Article
Subject	Public Health, Environmental and Occupational Health Psychiatry and Mental Health

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