Contagion of a liquidity crisis between two firms

• 成果类型: Article
• 署名作者: Oh, Frederick Dongchuhl
• 署名单位: Korea Advanced Institute of Science & Technology (KAIST)
• 刊物名称: JOURNAL OF FINANCIAL ECONOMICS
• ISSN/ISSBN: 0304-405X
• DOI: 10.1016/j.jfineco.2012.08.018
• 发表日期: 2013
• 页码: 386-400
• 关键词: contagion; Liquidity crisis; Global game; learning; coordination failure; information structure

摘要

This paper presents a model in which the contagion of a liquidity crisis between two nonfinancial institutions occurs because of learning activity within a common creditor pool. After creditors observe what occurs in a rollover game for a firm, they conjecture one another's type or attitude toward the risk associated with the firm's investment project. Creditors' inference about one another's type then influences their decision to lend to the next firm. By providing an analysis of the incidence of failure (the threshold for a liquidity crisis) for each firm, this paper demonstrates that the risk of contagion increases sharply if it originates ex ante from a firm facing a low probability of failure. In addition, the paper proposes some policy measures for mitigating the severity of contagion during a liquidity crisis. (c) 2012 Elsevier B.V. All rights reserved.