Aftermath of Banking Crises : Effectson Real and Monetary Variables

Author/Editor:

Poonam Gupta

Publication Date:

June 1, 2000

Electronic Access:

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Disclaimer: This Working Paper should not be reported as representing the views of the IMF.The views expressed in this Working Paper are those of the author(s) and do not necessarily represent those of the IMF or IMF policy. Working Papers describe research in progress by the author(s) and are published to elicit comments and to further debate

Summary:

In this paper a simple optimizing model is developed to analyze the implications of a banking crisis. Banks are incorporated by assuming that they intermediate funds between firms and households. It is shown that when depositors perceive the quality of deposits to have deteriorated, they switch from deposits to cash. Because of the higher cost of liquidity, consumption, M2 and the M2 multiplier decline, interest rates on deposits and loans increase and output contracts. The findings of the paper match the key stylized facts of banking crises.

Series:

Working Paper No. 00/96

Subject:

English

Publication Date:

June 1, 2000

ISBN/ISSN:

9781451851908/1018-5941

Stock No:

WPIEA0962000

Price:

$15.00 (Academic Rate:$15.00)

Format:

Paper

Pages:

25

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