Arbeitspapier

Fragility of resale markets for securitized assets and policy of asset purchases

Markets for securitized assets were characterized by high liquidity prior to the recent financial crisis and by a sudden market dry-up at the onset of the crisis. A general equilibrium model with heterogeneous investment opportunities and information frictions predicts that, in boom periods or mild recessions, the degree of adverse selection in resale markets for securitized assets is limited because of the reputation-based guarantees by asset originators. This supports investment and output. However, in a deep recession, characterized by high dispersion of asset qualities, there is a sudden surge in adverse selection due to an economy-wide default on reputation-based guarantees, which persistently depresses the output in the economy. Government policy of asset purchases limits the negative effects of adverse selection on the real economy, but may create a negative moral hazard problem.

Sprache
Englisch

Erschienen in
Series: Bank of Canada Staff Working Paper ; No. 2016-46

Klassifikation
Wirtschaft
Business Fluctuations; Cycles
Financial Crises
Thema
Business fluctuations and cycles
Economic models
Credit and credit aggregates
Financial markets
Financial stability
Financial system regulation and policies

Ereignis
Geistige Schöpfung
(wer)
Kuncl, Martin
Ereignis
Veröffentlichung
(wer)
Bank of Canada
(wo)
Ottawa
(wann)
2016

DOI
doi:10.34989/swp-2016-46
Handle
Letzte Aktualisierung
20.09.2024, 08:22 MESZ

Datenpartner

Dieses Objekt wird bereitgestellt von:
ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. Bei Fragen zum Objekt wenden Sie sich bitte an den Datenpartner.

Objekttyp

  • Arbeitspapier

Beteiligte

  • Kuncl, Martin
  • Bank of Canada

Entstanden

  • 2016

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