CIRJE-F-412 | "Banking in General Equilibrium with an Application toJapan." |
Author Name | Braun, R. Anton and Max Gillman |
Date | April 2006 |
Full Paper | PDF file@ |
Remarks | @ |
Abstract |
Japan has now experienced over a decade of slow growth and deflation. This period has also
been associated with protracted problems in the banking sector. A wide range of measures have
been tried in to restore health in the banking sector including recapitalization, the extension of
100% guarantees to all deposits, and central bank purchases of shares held by banks. It has also
argued that ending deflation is an important ingredient in restoring banking sector health. This
paper develops a general equilibrium of the banking sector. In our model the banking sector
produces an intermediate good that is used to produce investment goods and a variable fraction
of consumption goods. We then assess the implications of alternative policies designed to assist
the banking sector in terms of their implications for welfare and the size and profitability of the
banking sector.
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