Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises

M. Gertler, N. Kiyotaki, A. Prestipino

    Research output: Chapter in Book/Report/Conference proceedingChapter


    There has been considerable progress in developing macroeconomic models of banking crises. However, most of this literature focuses on the retail sector where banks obtain deposits from households. In fact, the recent financial crisis that triggered the Great Recession featured a disruption of wholesale funding markets, where banks lend to one another. Accordingly, to understand the financial crisis as well as to draw policy implications, it is essential to capture the role of wholesale banking. The objective of this chapter is to characterize a model that can be seen as a natural extension of the existing literature, but in which the analysis is focused on wholesale funding markets. The model accounts for both the buildup and collapse of wholesale banking and also sketches out the transmission of the crises to the real sector. We also draw out the implications of possible instability in the wholesale banking sector for lender-of-last resort policy as well as for macroprudential policy.

    Original languageEnglish (US)
    Title of host publicationHandbook of Macroeconomics, 2016
    EditorsJohn B. Taylor, Harald Uhlig
    PublisherElsevier B.V.
    Number of pages81
    ISBN (Print)9780444594877
    StatePublished - 2016

    Publication series

    NameHandbook of Macroeconomics
    ISSN (Print)1574-0048


    • Financial crises
    • Interbank markets
    • Rollover risk
    • Wholesale banking

    ASJC Scopus subject areas

    • Economics and Econometrics
    • Economics, Econometrics and Finance (miscellaneous)


    Dive into the research topics of 'Wholesale Banking and Bank Runs in Macroeconomic Modeling of Financial Crises'. Together they form a unique fingerprint.

    Cite this