Which Financial Frictions? Parsing the Evidence from the Financial Crisis of 2007 to 2009

By Tobias Adrian, Paolo Colla, Hyun Song Shin. NBER macroeconomics annual, 2013

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What Happened: Financial Factors in the Great Recession (2018, background): “As a result, with perfect markets the cost of raising funds externally equals the opportunity cost of lending out internal funds.(1)”
Bank Leverage Cycles (2017, neutral): “In particular, the cash flow in (4) is paid off entirely to the lending banks.”
Search for Yield (2017, background): “…banks, which could be 2See Quadrini (2011) and Brunnermeier, Eisenbach, and Sannikov (2012) for surveys of macroeconomic models with nancial frictions, and Adrian, Colla, and Shin (2013) for a review of the performance of these models in explaining key features of the 2007-2009 nancial crisis.”