Conference Paper

Bank Leverage Cycles and the External Finance Premium in Tunisia, a DSGE Model Approach

No.

ERF29AC_122

Publisher

ERF

Date

April, 2023

The 2007-2008 financial crisis abruptly ended a long period of economic stability, prompting economists to reconsider the role of the financial sector and to reassess its macroeconomic impact. On one hand, this crisis was caused by “credit boom” triggered by household expectations of rising housing prices, and by “housing bubble” generated by the sharp rise in housing prices by investors due to an increase in demand, on the other hand. Different approaches have been developed in the literature to address the crisis issues and to investigate the potential reasons. Most of these researches have focused on the financial accelerator effect. The term financial accelerator is used to reflect the amplification of economic shocks and their propagation mechanism. It aims to explain how relatively small economic shocks can have large and persistent effects on the aggregate economic activity due to the financial market imperfections (Bruno, 2011). The different modeling approaches of the financial accelerator reflect the variety of the asymmetric information problems between borrowers and lenders. They reflect the various participants' attitudes toward whether they can overcome the problem of asymmetric information or not. The financial accelerator effect has been used to explain the bank lending channel as well.
Bank Leverage Cycles and the External Finance Premium in Tunisia, a DSGE Model Approach

Authors

Rym Arem

Ph.D. Candidate, University of Carthage

Bank Leverage Cycles and the External Finance Premium in Tunisia, a DSGE Model Approach

Research Fellows

Mahmoud Sami Nabi

Professor of Economics, University of Carthage

Bank Leverage Cycles and the External Finance Premium in Tunisia, a DSGE Model Approach

Authors

Houda Boubaker

Assistant Professor, Mediterranean School of Business, South...