Cournot Fire Sales

• 成果类型: Article
• 署名作者: Eisenbach, Thomas M.; Phelan, Gregory
• 署名单位: Federal Reserve System - USA; Federal Reserve Bank - New York; Williams College
• 刊物名称: AMERICAN ECONOMIC JOURNAL-MACROECONOMICS
• ISSN/ISSBN: 1945-7707
• DOI: 10.1257/mac.20200283
• 发表日期: 2022
• 页码: 508-542
• 关键词: Bank runs; liquidity; equilibrium

摘要

In standard Walrasian macro finance models, pecuniary externalities due to fire sales lead to excessive borrowing and insufficient liquidity holdings. We investigate whether imperfect competition (Cournot) improves welfare through internalizing the externality and find that this is far from guaranteed. Cournot competition can overcorrect the inefficiently high borrowing in a standard model of levered real investment. By contrast, Cournot competition can exacerbate the inefficiently low liquidity in a standard model of financial portfolio choice. Implications for welfare and regulation are therefore sector specific, depending both on the nature of the shocks and the competitiveness of the industry.