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A Study on the Formation Mechanism of the Bank Credit Behavior’s Cyclicality: An Analysis Based on the DSGE Model
Pages: 1-11
Year: Issue:  4
Journal: Nankai Journal(Philosophy,Literature and Social Science Edition)

Keyword:  Credit BehaviorCyclicalityDefault RiskDSGE Model;
Abstract: Based on the four-sector’s DSGE model including corporate default and financial frictions, the dynamic interaction among bank credit, corporate defaults and macroeconomic fluctuations is investigated, and the formation mechanism of the bank credit behavior’s cyclicality is discussed. The simulation results show that the contraction of bank credit has bad influence on firms’ external environment and profitability, which will increase the firms’ default risk. Meanwhile, the increase of default risk will in turn affect the banks’ credit decisions through the external finance premium adjustment and the expected loss of loan default. The dynamic interaction between banks’ credit decisions and corporate defaults makes credit behavior endogenous from cyclical fluctuations in the macro economy, by which credit behavior shows the obvious pro-cyclical characteristics.
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