Capital injection, to banks versus debt relief to households
- I propose a dynamic stochastic general equilibrium model in which the leverage of borrowers as well as banks and housing finance play a crucial role in the model dynamics. The model is used to evaluate the relative effectiveness of a policy to inject capital into banks versus a policy to relieve households of mortgage debt. In normal times, when the economy is near the steady state and policy rates are set according to a Taylor-type rule, capital injections to banks are more effective in stimulating the economy in the long-run. However, in the middle of a housing debt crisis, when households are highly leveraged, the short-run output effects of the debt relief are more substantial. When the zero lower bound (ZLB) is additionally considered, the debt relief policy can be much more powerful in boosting the economy both in the short-run and in the longrun. Moreover, the output effects of the debt relief become increasingly larger, the longer the ZLB is binding.
Author: | Jinhyuk YooGND |
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URN: | urn:nbn:de:hebis:30:3-431579 |
Parent Title (English): | Working paper series / Institute for Monetary and Financial Stability ; 111 |
Series (Serial Number): | Working paper series / Institute for Monetary and Financial Stability (111) |
Publisher: | Johann Wolfgang Goethe-Univ., Inst. for Monetary and Financial Stability |
Place of publication: | Frankfurt am Main |
Document Type: | Working Paper |
Language: | English |
Year of Completion: | 2017 |
Year of first Publication: | 2017 |
Publishing Institution: | Universitätsbibliothek Johann Christian Senckenberg |
Release Date: | 2017/04/25 |
Tag: | capital injection to banks; debt relief to households; housing debt crisis; leverage; macrofinancial linkages; zero lower bound |
Issue: | April 13, 2017 |
Page Number: | 60 |
HeBIS-PPN: | 402915631 |
Institutes: | Wirtschaftswissenschaften / Wirtschaftswissenschaften |
Wissenschaftliche Zentren und koordinierte Programme / Institute for Monetary and Financial Stability (IMFS) | |
Wissenschaftliche Zentren und koordinierte Programme / Center for Financial Studies (CFS) | |
Wissenschaftliche Zentren und koordinierte Programme / Sustainable Architecture for Finance in Europe (SAFE) | |
Dewey Decimal Classification: | 3 Sozialwissenschaften / 33 Wirtschaft / 330 Wirtschaft |
Sammlungen: | Universitätspublikationen |
Licence (German): | Deutsches Urheberrecht |