Keynesian model. Relative to Representative Agent (RANK) models, our framework introduces a precautionary-savings channel, as … households in both countries face uninsurable income risk, and a real-income channel, as households have heterogeneous marginal … propensities to consume (MPC). While both channels amplify the size of spillovers/spillbacks, only precautionary savings can change …

risk in which all banks choose inefficiently high leverage to fund correlated assets and market discipline is compromised … ; systemic risk ; bailout ; forbearance ; moral hazard ; capital requirements …