Fire sales and the financial accelerator

• 成果类型: Article
• 署名作者: Choi, Woon Gyu; Cook, David
• 署名单位: Hong Kong University of Science & Technology; International Monetary Fund
• 刊物名称: JOURNAL OF MONETARY ECONOMICS
• ISSN/ISSBN: 0304-3932
• DOI: 10.1016/j.jmoneco.2012.04.001
• 发表日期: 2012
• 页码: 336-351

摘要

During financial turmoil, increases in risk lead to higher default, foreclosure, and fire sales. This paper introduces a costly liquidation process for foreclosed collateral and pro-cyclical recovery rates in a dynamic stochastic general equilibrium model of the financial accelerator. Links between endogenous recovery rates, risk premia, and default risk generate a liquidity spiral, magnifying financial accelerator effects. We illustrate how collateral liquidation and monetary policy alter the real impact of financial shocks operating through macro-financial linkages; and the way a government subsidy on collateral liquidity and required liquidity buffers can help dampen the liquidity spiral by shoring up recovery rates. (C) 2012 Elsevier B.V. All rights reserved.