Bewley Banks
Abstract:
We document new facts on the cross-se ctional and business cycle properties of bank size and market power, highli ghting the unconditional counter-cyclicality of asset markups and pro-cycli cality of deposit markups. We then develop a dynamic general equilibrium mo del with heterogeneous financial intermediaries, incomplete markets, two-si ded market power, and aggregate uncertainty. The model generates a bank net worth distribution fluctuation problem analogous to the canonical Bewley-H uggett-Aiyagari-Imrohoglu environment. We show that non-separable preferenc es and aggregate TFP shocks produce empirically-consistent cyclicality of m arkups and key financial aggregates. Time-varying bank market power and a p recautionary lending motive both dampen aggregate responses to exogenous sh ocks. Counter-cyclical idiosyncratic bank return risk, however, is a signif icant source of business cycle amplification, especially in the case of ban king crises.
DTSTAMP:20260405T170331Z DTSTART:20230327T143000Z DTEND:20230327T160000Z SEQUENCE:0 TRANSP:OPAQUE END:VEVENT END:VCALENDAR