01864cas a2200265 a 4500 AALejournalIMF011727 230101c9999 xx r poo 0 0eng d 5.00 USD 9781463938451 1018-5941 BD-DhAAL BD-DhAAL Sandri, Damiano. Balance-Sheet Shocks and Recapitalizations / Damiano Sandri, Fabian Valencia. Washington, D.C. : International Monetary Fund, 2012. 1 online resource (26 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students We develop a dynamic stochastic general equilibrium model with financial frictions on both financial intermediaries and goods-producing firms. In this context, due to high leverage of financial intermediaries, balance sheet disruptions in the financial sector are particularly detrimental for aggregate output. We show that the welfare gains from recapitalizing the financial sector in response to large but rare net worth losses are as large as those from eliminating business cycle fluctuations. We also find that these gains are increasing in the size of the net worth loss, are larger when recapitalization funds are raised from the household rather than the real sector, and may increase with a reduction in financial intermediaries idiosyncratic risk. Mode of access: Internet United States imf Valencia, Fabian. IMF Working Papers; Working Paper ; No. 2012/068 Full text available on IMF http://elibrary.imf.org/view/journals/001/2012/068/001.2012.issue-068-en.xml IMF e-Library