Balance sheet channel with information-trading frictions in secondary markets
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- dc.contributor.author Asriyan, Vladimir
- dc.date.accessioned 2021-03-23T09:03:51Z
- dc.date.available 2021-03-23T09:03:51Z
- dc.date.issued 2020
- dc.description.abstract This article develops a theory of the balance sheet channel that places a central emphasis on the liquidity of secondary markets for macro-contingent claims. We show that the presence of dispersed information and imperfect competition in secondary markets, interacted with financial constraints, results in mispricing and misallocation of aggregate risk, distorts aggregate investment, and exacerbates asset price and output volatility. The magnitude of balance sheet amplification effects becomes endogenously tied to the severity of market frictions, which likely vary over time and across economies. The laissez-faire equilibrium is constrained inefficient due to a novel externality originating from rent-extracting behaviour of agents in secondary markets. Optimal corrective policy boosts secondary market liquidity through subsidies to trade in macro-contingent claims, which enhances aggregate risk-sharing and stabilizes the business cycle.en
- dc.description.sponsorship I acknowledge financial support from the Spanish Ministry of Economy and Competitiveness Grant (ECO2014-54430-P), the Barcelona GSE Seed Grant and the Generalitat de Catalunya AGAUR Grant (2017SGR1393).
- dc.format.mimetype application/pdf
- dc.identifier.citation Asriyan V. Balance sheet channel with information-trading frictions in secondary markets. Rev Econ Stud. 2020 Oct 29;88(1):44-90. DOI: 10.1093/restud/rdaa069
- dc.identifier.doi http://dx.doi.org/10.1093/restud/rdaa069
- dc.identifier.issn 0034-6527
- dc.identifier.uri http://hdl.handle.net/10230/46898
- dc.language.iso eng
- dc.publisher Oxford University Press
- dc.relation.ispartof The Review of Economic Studies. 2020 Oct 29;88(1):44-90
- dc.relation.projectID info:eu-repo/grantAgreement/ES/1PE/ECO2014-54430-P
- dc.rights This is an Open Access article distributed under the terms of the Creative Commons Attribution Non-Commercial License (http://creativecommons.org/licenses/by-nc/4.0/), which permits non-commercial re-use, distribution, and reproduction in any medium, provided the original work is properly cited.
- dc.rights.accessRights info:eu-repo/semantics/openAccess
- dc.rights.uri http://creativecommons.org/licenses/by-nc/4.0/
- dc.subject.keyword Balance sheet channelen
- dc.subject.keyword Secondary marketsen
- dc.subject.keyword Risk-sharingen
- dc.subject.keyword Liquidityen
- dc.subject.keyword Information dispersionen
- dc.subject.keyword Trading frictionsen
- dc.subject.keyword Mechanism designen
- dc.subject.keyword Financial regulationen
- dc.title Balance sheet channel with information-trading frictions in secondary marketsen
- dc.type info:eu-repo/semantics/article
- dc.type.version info:eu-repo/semantics/publishedVersion