A residential mortgage bank lending channel during the financial crisis

2018 ◽  
Vol 43 (4) ◽  
pp. 631-656 ◽  
Author(s):  
Salman Tahsin ◽  
Timothy J. Yeager
Keyword(s):  
Financial Crisis ◽  
Bank Lending ◽  
Bank Lending Channel ◽  
Residential Mortgage ◽  
Lending Channel

scholarly journals Financial Intermediation and Macroeconomic Analysis

2010 ◽  
Vol 24 (4) ◽  
pp. 21-44 ◽  
Author(s):  
Michael Woodford
Keyword(s):  
Financial Crisis ◽  
Financial Intermediation ◽  
Bank Lending ◽  
Bank Lending Channel ◽  
Reserve Requirements ◽  
Lending Channel ◽  
Policy Responses ◽  
Macroeconomic Analysis ◽  
Credit Frictions ◽  
Recent Financial Crisis

Understanding phenomena such as the recent financial crisis, and possible policy responses, requires the use of a macroeconomic framework in which financial intermediation matters for the allocation of resources. Neither standard macroeconomic models that abstract from financial intermediation nor traditional models of the “bank lending channel” are adequate as a basis for understanding the recent crisis. Instead we need models in which intermediation plays a crucial role, but in which intermediation is modeled in a way that better conforms to current institutional realities. In particular, we need models that recognize that a market-based financial system—one in which intermediaries fund themselves by selling securities in competitive markets, rather than collecting deposits subject to reserve requirements—is not the same as a frictionless system. I sketch the basic elements of an approach that allows financial intermediation and credit frictions to be integrated into macroeconomic analysis in a straightforward way. I show how the model can be used to analyze the macroeconomic consequences of the recent financial crisis and conclude with a discussion of some implications of the model for the conduct of monetary policy.

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