Banking crises are infrequent macroeconomic events with the potential to inflict significant and lasting harm on the real economy. Drawing from the empirical literature, this paper highlights five facts on banking crises from a macroeconomic perspective. It conducts a targeted review of the literature on financial frictions and banking crises in a dynamic general equilibrium framework, and introduces a dynamic general equilibrium model of bank runs. The model' s ability to account for the five facts is examined, alongside its implications for policy. Finally, the paper explores the challenges of integrating macroprudential policy into the model.
Keywords: Banking crises; macroeconomic models; macroprudential policy
Views expressed in the paper are those of the authors and do not necessarily reflect those of the Bank of Japan or Institute for Monetary and Economic Studies.