In this paper we build on the network-based ﬁnancial accelerator model of Delli Gatti et al. (2010), modelling the ﬁrms' ﬁnancial structure following the “dynamic trade-oﬀ theory”, instead of the “pecking order theory”. Moreover, we allow for multiperiodal debt structure and consider multiple bank-ﬁrm links based on a myopic preferred-partner choice. In case of default, we also consider the loss given default rate (LGDR). We ﬁnd many results: (i) if leverage increases, the economy is riskier; (ii) a higher leverage pro-cyclicality has a destabilizing eﬀect; (iii) a pro-cyclical leverage weakens the monetary policy eﬀect; (iv) a Central Bank that wants to increase the interest rate, should previously check if the banking system is well capitalized; (v) policy maker has to develop the laws about bankruptcies to reduce the LGDR and improve the stability of banks.
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|Titolo:||Leveraged Network-Based Financial Accelerator|
|Data di pubblicazione:||2011|
|Appartiene alla tipologia:||02a Capitolo o Articolo|