Original scientific paper
https://doi.org/10.1080/1331677X.2022.2142813
Financial friction, rare disaster, and recovery policy
Xiang Cheng
Abstract
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.
Keywords
Rare disaster; New Keynesian model; consumer coupon policy; refinance policy; average social welfare loss
Hrčak ID:
306785
URI
Publication date:
30.4.2023.
Visits: 134 *