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Financial Intermediary Capital

Publication ,  Scholarly Edition
Rampini, AA; Viswanathan, S
January 1, 2019

We propose a dynamic theory of financial intermediaries that are better able to collateralize claims than households, that is, have a collateralization advantage. Intermediaries require capital as they have to finance the additional amount that they can lend out of their own net worth. The net worth of financial intermediaries and the corporate sector are both state variables affecting the spread between intermediated and direct finance and the dynamics of real economic activity, such as investment, and financing. The accumulation of net worth of intermediaries is slow relative to that of the corporate sector. The model is consistent with key stylized facts about macroeconomic downturns associated with a credit crunch, namely, their severity, their protractedness, and the fact that the severity of the credit crunch itself affects the severity and persistence of downturns. The model captures the tentative and halting nature of recoveries from crises.

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DOI

Publication Date

January 1, 2019

Start / End Page

413 / 455

Related Subject Headings

  • Economics
  • 3803 Economic theory
  • 3802 Econometrics
  • 3801 Applied economics
  • 14 Economics
 

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Rampini, A. A., & Viswanathan, S. (2019). Financial Intermediary Capital. https://doi.org/10.1093/restud/rdy020
Rampini, A. A., and S. Viswanathan. “Financial Intermediary Capital,” January 1, 2019. https://doi.org/10.1093/restud/rdy020.
Rampini AA, Viswanathan S. Financial Intermediary Capital. 2019. p. 413–55.
Rampini, A. A., and S. Viswanathan. Financial Intermediary Capital. 1 Jan. 2019, pp. 413–55. Scopus, doi:10.1093/restud/rdy020.
Rampini AA, Viswanathan S. Financial Intermediary Capital. 2019. p. 413–455.

DOI

Publication Date

January 1, 2019

Start / End Page

413 / 455

Related Subject Headings

  • Economics
  • 3803 Economic theory
  • 3802 Econometrics
  • 3801 Applied economics
  • 14 Economics