Financial Risk Capacity

• 成果类型: Article
• 署名作者: Bigio, Saki; d'Avernas, Adrien
• 署名单位: University of California System; University of California Los Angeles; Stockholm School of Economics
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20160286
• 发表日期: 2021
• 页码: 142-181
• 关键词: Adverse selection; endogenous liquidity; fire sales; intermediation; INFORMATION; DYNAMICS; equilibrium; illiquidity; MARKETS; MODEL

摘要

Financial crises are particularly severe and lengthy when banks fail to recapitalize after bearing large losses. We present a model that explains the slow recovery of bank capital and economic activity. Banks provide intermediation in markets with information asymmetries. Large equity losses force banks to tighten intermediation, which exacerbates adverse selection. Adverse selection lowers bank profit margins, which slows both the internal growth of equity and equity injections. This mechanism generates financial crises characterized by persistent low growth. The lack of equity injections during crises is a coordination failure that is solved when the decision to recapitalize banks is centralized.