Financial friction, rare disaster, and recovery policy

Bibliographic Data

ID15067955
AuthorsXiang Cheng (0000-0002-1475-3201, Sichuan University, corresponding author)
Year2023
Volume36
Issue2
Publication date2023-07-10
Open AccessYes
TypeARTICLE
VenueEconomic Research-Ekonomska Istraživanja (JOURNAL)
Journal identifiersISSN: 1331-677X • E-ISSN: 1848-9664
PublisherInforma UK Limited (PUBLISHER • GB)
DOI10.1080/1331677x.2022.2142813
OpenAlexW4309293548
LanguageEN
References cited51

The paper introduces financial intermediation into the New Keynesian model with rare disasters, analyzes the impacts of rare disaster shock on the macro economy, and compares the effects of different economic recovery policies. Based on the numerical analysis, this study finds that: (1) rare disaster risk shock retains a negative relationship with consumption levels, and banks increase their leverage ratios to cause risk accumulation; (2) refinance policy and consumer coupon policy can alleviate economic fluctuations caused by disaster risks from various channels; (3) the consumer coupon policy is conducive to reducing the average social welfare loss caused by disaster risks. It is believed that the establishment of a sustainable economic stimulus mechanism to fundamentally reduce the impact of catastrophic events on the macro economy and achieve economic recovery in a short period are essential issues that should be urgently addressed by countries

Business · Financial system · Banking stability, regulation, efficiency · Global Financial Crisis and Policies · Monetary Policy and Economic Impact · Finance

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Open DOIOpen Access