Hostname: page-component-586b7cd67f-rcrh6 Total loading time: 0 Render date: 2024-11-25T00:23:45.905Z Has data issue: false hasContentIssue false
  • English
  • Français

Financial Crises, Regulation and Growth

Published online by Cambridge University Press:  26 March 2020

Ray Barrell ,
Ian Hurst  and
Simon Kirby
Ray Barrell*
Affiliation:
National Institute of Economic and Social Research
Ian Hurst
Affiliation:
National Institute of Economic and Social Research
Simon Kirby
Affiliation:
National Institute of Economic and Social Research
*
e-mail [email protected]
Get access Rights & Permissions [Opens in a new window]

Abstract

The paper discusses the effects on growth of a systemic banking crisis as a result of debt defaults. These effects will come from the impact of credit rationing on consumption and credit and from the impacts of a significant rise in the spread between lending and borrowing rates for both producers and consumers. The analysis uses the dynamic stochastic general equilibrium version of the National Institute global model. The paper also investigates the impact on output of a permanent, regulation induced, rise in margins in the financial sector, taking into account the impacts of regulation on equity market valuations.

Keywords

Financial crises: financial market spreadsforward looking consumersdynamic stochastic general equilibrium modelsE17E44
Type
Articles
Information
National Institute Economic Review , Volume 206 , October 2008 , pp. 56 - 65
Copyright
Copyright © 2008 National Institute of Economic and Social Research

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

Footnotes

∗

This paper builds on Barrell, Hurst and Kirby (2008) which was given at the AIECE conference in Budapest and at the MMF conference at Brunel University on the 9th and 20th of May. We would like to thank conference participants, and especially Wim Suyker, John FitzGerald, Chris Martin and Charles Goodhart for their comments as well as our colleagues Dawn Holland and Martin Weale and Phil Davis for their contributions to our understanding of this topic and to this paper in particular. Previous versions have been given at seminars at the European Commission in Brussels, the Bundesbank in Frankfurt, the IMF in Washington, at the DZ Central Bankers conference in Vienna and at IfW in Kiel. Some of the work in this paper was initially funded by the European Commission in a project on the macroeconomic implications of Basel II, and the model development has been funded by the NiGEM user group, which includes the Bank of England, the ECB, the Bundesbank, the Swedish Riksbank, the IMF, the Bank of France, the Bank of Spain, the Bank of Italy and other members of the ESCB. The responsibility for the views expressed here remains ours.

References

Al-Eyd, A., Barrell, R. and Holland, D. (2006), ‘A portfolio balance explanation of the euro dollar rate’, in Cobham, D. (ed.), The Travails of the Eurozone, Palgrave.Google Scholar
Bank of England (2008), Financial Stability Review.Google Scholar
Barrell, R. (2008), ‘Financial crises and global prospects’, National Institute Economic Review, 204, pp. 9–13.CrossRefGoogle Scholar
Barrell, R., Byrne, J., and Dury, K. (2003), ‘The implications of diversity in consumption behaviour for the choice of monetary policy rules in Europe’, Economic Modelling, 20, pp. 275–99.CrossRefGoogle Scholar
Barrell, R. and Davis, E.P. (2005), ‘Policy design and macroeconomic stabillity in Europe’, National Institute Economic Review, 191, pp. 94–105.CrossRefGoogle Scholar
- (2007), ‘Financial liberalisation, consumption and wealth effects in 7 OECD countries’, Scottish Journal of Political Economy, May.Google Scholar
Barrell, R., Davis, E.P. and Pomerantz, O. (2006), ‘Costs of financial instability, household-sector balance sheets and consumption’, Journal of Financial Stability, 2, 2, pp. 194–216.CrossRefGoogle Scholar
Barrell, R. and Dury, K. (2000), ‘An evaluation of monetary targeting regimes’, National Institute Economic Review, 174, October.CrossRefGoogle Scholar
Barrell, R., Hall, S. and Hurst, I. (2006), ‘Monetary policy rules’, Economics Letters, pp. 1–6.CrossRefGoogle Scholar
Barrell, R., Holland, D. and Hurst, A.I. (2008), ‘Sustainable adjustment of global imbalances’, in Aslund, A. and Dabrowsk, M. (eds), Challenges of Globalization, Peterson Institute of International Economics.CrossRefGoogle Scholar
Barrell, R. and Hurst, A.I. (2008), ‘Financial crises and the prospects for recession’, National Institute Economic Review, 204, April, pp. 33–8.CrossRefGoogle Scholar
Barrell, R., Hurst, I. and Kirby, S. (2008), ‘Financial crises, regulation and growth’, National Institute Discussion Paper no. 313.Google Scholar
Barrell, R. and Kirby, S. (2007), ‘Interest rates and the UK economy’, National Institute Economic Review, 202, October, pp. 61–4.CrossRefGoogle Scholar
- (2008), ‘The budgetary implications of global shocks to cycles and trends in output’, ESRI Budget Outlook, October, Dublin.Google Scholar
Barrell, R. and Pain, N. (1997), ‘Foreign direct investment, technological change, and economic growth within Europe’, Economic Journal, 107, pp. 1770–6.CrossRefGoogle Scholar
Barrell, R. and Sefton, J. (1997), ‘Fiscal policy and the Maastricht solvency criteria’, Manchester School, June.CrossRefGoogle Scholar
Brealey, R. and Myers, S. (2000), ‘Principles of Corporate Finance’ MacGraw Hill.Google Scholar
Buiter, W.H. (2008), ‘Housing wealth isn't wealth’, NBER Working Paper No. W14204.Google Scholar
Ellis, L. (2008), ‘The housing meltdown - why did it happen in the US? BIS Working Paper no. 259.Google Scholar
Harrison, R., Nikolov, K., Quinn, M., Ramsay, G., Scott, A. and Thomas, R. (2005), ‘The Bank of England Quarterly Model’, Bank of England, 2006.Google Scholar
IMF (2008), Global Financial Stability Report, September.Google Scholar
Kroszner, R., Laeven, L. and Klinggebiel, D. (2007), ‘Banking crises, financial dependence and growth’, Journal of Financial Economics, 84, pp.187–228.CrossRefGoogle Scholar
White, M.J. (2008), ‘Bankruptcy reform and credit cards’, Journal of Economic Perspectives, 21, 4, pp. 175–99.Google Scholar