https://macropaperwarehouse.com/authors/yu-ting-chiang/Yu-Ting ChiangHugo -- gohugo.ioen-ushttps://macropaperwarehouse.com/papers/financial-intermediation-and-aggregate-demand-a-sufficient-statistics-approach/https://macropaperwarehouse.com/papers/financial-intermediation-and-aggregate-demand-a-sufficient-statistics-approach/<p>This paper develops a sufficient statistics approach to measuring the aggregate demand effects of financial intermediation disturbances — shocks to the ability of financial intermediaries to supply credit. The central contribution is characterizing, in a general class of models with heterogeneous firms and financial frictions, the aggregate demand impact of a disruption to intermediary balance sheets as a function of a small set of sufficient statistics observable from data: the elasticity of investment to intermediary net worth, the share of investment financed through intermediaries, and the sensitivity of asset prices to intermediary capacity. The approach does not require full model estimation, allowing model-free measurement of the aggregate demand loss from identified intermediary distress episodes. Applied to the 2008–2009 financial crisis, the paper estimates that the shock to financial intermediary balance sheets generated an aggregate demand reduction of 3–4 percentage points of GDP — substantially larger than estimates from reduced-form regressions that do not account for general equilibrium propagation.</p>