Macroeconomic Effects of Bank Recapitalizations

Speaker: Antti Ripatti (University of Helsinki)

Location and time:  NBS Conference Hall; 11:00 - 13:00
We build a dynamic stochastic general equilibrium model where investments by entrepreneurs and banks can be leveraged by external funding but are subject to a dual moral hazard problem. In our model banks' monitoring investments have a variable scale and real opportunity cost. As a result, the monitoring investments vary over the business cycle which implies that not only the aggregate amount bank capital and entrepreneurial wealth but also their composition matters in the propagation of shocks. We show that in equilibrium bank capital is scarce and that it greatly amplifies the investment shocks but dampens many other type of shocks. We also study capital injections from the government to banks. We show that capital injections can be useful as a shock cushion, but they may be counter-productive if the aim is to avoid deleveraging and to boost investments.

1. Presentation
2. Macroeconomic Ef ects of Bank Recapitalizations (in progress)

About the speaker:

Antti Ripatti
Personal website:

Antti Ripatti - professor of empirical macroeconomics at the Discipline of Economics of the Department of Political and Economic Studies of the Faculty of Social Sciences of the University of Helsinki and at HECER. He is also visiting scholar at the Research Unit of the Bank of Finland (Suomen Pankki) and at the Statistics Finland

Here you can find a link to full CV.
Here is a link to the Ideas Repec page.