The Pecking Order of Segmentation and Liquidity-Injection Policies in a Model of Contagious Crises

• 成果类型: Article
• 署名作者: Guembel, Alexander; Sussman, Oren
• 署名单位: Universite de Toulouse; Universite Toulouse 1 Capitole; Toulouse School of Economics; University of Oxford
• 刊物名称: REVIEW OF ECONOMIC STUDIES
• ISSN/ISSBN: 0034-6527
• DOI: 10.1093/restud/rdz015
• 发表日期: 2020
• 页码: 1296-1330
• 关键词: asset fire sales; Systemic risk; international transmission; capital flows; constraints; debt; equilibrium; coinsurance; volatility; purchases

摘要

We study a two-country setting in which leveraged investors generate fire-sale externalities, leading to financial crises and contagion. Governments can affect the incidence of financial crisis and the degree of contagion by injecting public liquidity and, additionally, by segmenting the countries' liquidity markets. We show that segmentation allows a country to avoid contagion and fend off mild financial crises caused by a small shock to its liquidity demand, at the cost of exposing it to more severe financial crises caused by a large shock. We derive a pecking order result, whereby segmentation is a second-best measure that coordinated governments should use only when tax capacity constrains them from injecting liquidity. Even when segmentation is welfare-enhancing, it should be applied to public liquidity alone, never restricting the free flow of private liquidity across countries. Uncoordinated governments tend to use segmentation excessively.