Journal article
FINANCIAL NEWS, BANKS, AND BUSINESS CYCLES
Abstract
In a model where banks face a capital sufficiency requirement, we demonstrate that news about a fall in the expected return on a portfolio of international long bonds held by a bank leads to an immediate and persistent fall in economic activity. Even if the news never materializes, economic activity falls below steady state for several periods, followed by a recovery. The portfolio adjustment induced by the capital sufficiency requirements …
Authors
Gunn CM; Johri A
Journal
Macroeconomic Dynamics, Vol. 22, No. 2, pp. 173–198
Publisher
Cambridge University Press (CUP)
Publication Date
March 2018
DOI
10.1017/s1365100516000134
ISSN
1365-1005