The Business Cycle Implications of Banks' Maturity Transformation

Martin M. Andreasen, Marcelo Ferman, Pawel Zabczyk
2011 Social Science Research Network  
This paper develops a DSGE model in which banks use short-term deposits to provide firms with long-term credit. The demand for long-term credit arises because firms borrow in order to finance their capital stock which they only adjust at infrequent intervals. We show within a real business cycle framework that maturity transformation in the banking sector in general attenuates the output response to a technological shock. Implications of long-term nominal contracts are also examined in a New
more » ... nesian version of the model, where we find that maturity transformation reduces the real effects of a monetary policy shock.
doi:10.2139/ssrn.1569365 fatcat:kkhs4l4znrh7ffj53q6iip3pca