It is almost impossible to really understand the crisis of credit without having an idea of how securitization transactions work. In a way (and this is of course a simplification), the crisis of credit is no more than an old fashioned asset price bubble. Subsequently it was a downturn in the...

This paper develops a Dynamic Stochastic General Equilibrium (DSGE) model to study how the instability of the banking sector can amplify and propagate business cycles. The model builds on Bernanke, Gertler and Gilchrist (BGG) (1999), who consider credit demand friction due to agency cost, but it...