Financial Entanglement: A Theory of Incomplete Integration, Leverage, Crashes, and Contagion

• 成果类型: Article
• 署名作者: Garleanu, Nicolae; Panageas, Stavros; Yu, Jianfeng
• 署名单位: University of California System; University of California Berkeley; University of Chicago; University of Minnesota System; University of Minnesota Twin Cities; The Chinese University of Hong Kong, Shenzhen
• 刊物名称: AMERICAN ECONOMIC REVIEW
• ISSN/ISSBN: 0002-8282
• DOI: 10.1257/aer.20131076
• 发表日期: 2015
• 页码: 1979-2010
• 关键词: market liquidity; Systemic risk; asset prices; MODEL; crises; equilibrium; constraints; INFORMATION; geography; GOODS

摘要

We propose a unified model of limited market integration, asset-price determination, leveraging, and contagion. Investors and firms are located on a circle, and access to markets involves participation costs that increase with distance. Due to a complementarity between participation and leverage decisions, the equilibrium may exhibit diverse leverage and participation choices across investors, although investors are ex ante identical. Small changes in market-access costs can cause a change in the type of equilibrium, leading to discontinuous price changes, deleveraging, and portfolio-flow reversals. Moreover, the market is subject to contagion-an adverse shock to investors in some locations affects prices everywhere. (JEL D83, G11, G12, G32, G35)