Financial sector structure and financial crisis burden

Mavrotas, G. and Vinogradov, D. (2007) Financial sector structure and financial crisis burden. Journal of Financial Stability, 3(4), pp. 295-323. (doi: 10.1016/j.jfs.2007.06.001)

Full text not currently available from Enlighten.


We consider an overlapping generations model in the presence of financial intermediation. The paper focuses on the analysis of the consequences of a sudden negative repayments shock on financial intermediation capacity and consequently on the economy as a whole. The model exhibits a property of the ‘chain reaction’ when a single macroeconomic shock can lead to the exhaustion of credit resources and subsequently to the collapse of the banking system. To maintain the capability of the system to recover, a regulatory intervention is needed even in presence of the state guarantees on agents’ deposits in the banks. We compare the results for an intermediated economy with those derived for the market economy and draw some broad conclusions regarding the crisis consequences depending on the financial sector structure. We also compare the model predictions with the stylised facts about the Russian financial crisis of 1998.

Item Type:Articles
Glasgow Author(s) Enlighten ID:Vinogradov, Professor Dmitri
Authors: Mavrotas, G., and Vinogradov, D.
Subjects:H Social Sciences > HB Economic Theory
H Social Sciences > HG Finance
College/School:College of Social Sciences > Adam Smith Business School > Accounting and Finance
Journal Name:Journal of Financial Stability
ISSN (Online):1878-0962
Published Online:19 June 2007

University Staff: Request a correction | Enlighten Editors: Update this record