Balance sheet recessions with informational and trading frictions
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- dc.contributor.author Asriyan, Vladimir
- dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa
- dc.date.accessioned 2024-11-14T10:10:07Z
- dc.date.available 2024-11-14T10:10:07Z
- dc.date.issued 2014-10-01
- dc.date.modified 2024-11-14T10:04:49Z
- dc.description.abstract We consider a model of the balance sheet channel à la Kiyotaki and Moore (1997) but allow agents to trade claims contingent on aggregate states. We show that the interaction of information dispersion about aggregate states with trading frictions in secondary claims markets generates mispricing of aggregate risk, distorts the demand for state-contingent claims and limits aggregate risk-sharing, thereby giving rise to the balance sheet channel. The magnitude of aggregate fluctuations becomes tied to the severity of information-trading frictions and, as they vanish, the balance sheet channel disappears. Thus, the model suggests that the functioning of secondary claims markets has important implications for business cycles. Importantly, the laissez-faire equilibrium is constrained inefficient because information-trading frictions generate rent-extraction in secondary claims markets. Optimal policy targets the inefficiency at its source by promoting both issuance and trade of state-contingent claims in markets.
- dc.format.mimetype application/pdf*
- dc.identifier https://econ-papers.upf.edu/ca/paper.php?id=1463
- dc.identifier.citation Review of Economic Studies 88, 2021 (44-90)
- dc.identifier.uri http://hdl.handle.net/10230/23064
- dc.language.iso eng
- dc.relation.ispartofseries Economics and Business Working Papers Series; 1463
- dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc-nd/3.0/es/
- dc.subject.keyword balance sheet recessions; contingent contracts; liquidity; informational frictions; trading frictions; financial regulation.
- dc.subject.keyword Macroeconomics and International Economics
- dc.title Balance sheet recessions with informational and trading frictions
- dc.title.alternative Balance Sheet Channel with Information-Trading Frictions in Secondary Markets
- dc.type info:eu-repo/semantics/workingPaper