Original scientific paper
https://doi.org/10.1080/1331677X.2020.1867212
Banks’ maturity mismatch, financial stability, and macroeconomic dynamics
Liu Yang
Yuhuan Yi
Shanshan Wang
Abstract
The average maturity of total bank assets has been rising sharply
following the 4-trillion-yuan stimulus package proposed by the
Chinese government in 2009. This paper investigates the macroeconomic implications of maturity mismatch problem using the
Chinese data over the period 2007Q1–2019Q4. We extend the
New-Keynesian DSGE framework from several dimensions: (i)
financial frictions between banks and households; (ii) multi-period
loan contracts; (iii) dynamic differential reserve requirement as a
macroprudential regulation tool. After estimating the model with
Chinese data, the simulation results indicate that the sluggish
adjustment of financing cost caused by maturity mismatch will
attenuate the real sector fluctuation, however, the feedback
effects will amplify the responses of the banking sector.
Meanwhile, a severe maturity mismatch will dampen the effect of
the required reserve rate as a tool to keep financial stability when
confronted with productivity shock.
Keywords
Banks’ Maturity mismatch; financial stability; New-Keynesian model
Hrčak ID:
301472
URI
Publication date:
31.12.2021.
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