Liquidity and default in an exchange economy
This paper analyzes various channels of shock transmission in an economy subject to financial frictions, by incorporating liquidity and default effects on asset prices. We develop a framework in which we can assess financial stability policy by introducing a simplified model of exchange and financia...
| Main Authors: | , |
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| Formato: | Journal article |
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Elsevier
2016
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| _version_ | 1826288425645375488 |
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| author | Martinez, S Tsomocos, D |
| author_facet | Martinez, S Tsomocos, D |
| author_sort | Martinez, S |
| collection | OXFORD |
| description | This paper analyzes various channels of shock transmission in an economy subject to financial frictions, by incorporating liquidity and default effects on asset prices. We develop a framework in which we can assess financial stability policy by introducing a simplified model of exchange and financial intermediation that captures the effects of shocks on financial and real sectors of the economy. The model allows us to explain essential mechanisms and interactions of financial and real economic variables in a comprehensive, yet intuitive fashion. Our results suggest that liquidity and default in the credit markets should be analyzed contemporaneously when financial, monetary and productivity shocks affect financial stability as well as the real economy. |
| first_indexed | 2024-03-07T02:13:30Z |
| format | Journal article |
| id | oxford-uuid:a1712251-2302-4eea-94dd-6d5b5a0e2e0d |
| institution | University of Oxford |
| last_indexed | 2024-03-07T02:13:30Z |
| publishDate | 2016 |
| publisher | Elsevier |
| record_format | dspace |
| spelling | oxford-uuid:a1712251-2302-4eea-94dd-6d5b5a0e2e0d2022-03-27T02:13:18ZLiquidity and default in an exchange economyJournal articlehttp://purl.org/coar/resource_type/c_dcae04bcuuid:a1712251-2302-4eea-94dd-6d5b5a0e2e0dSymplectic Elements at OxfordElsevier2016Martinez, STsomocos, DThis paper analyzes various channels of shock transmission in an economy subject to financial frictions, by incorporating liquidity and default effects on asset prices. We develop a framework in which we can assess financial stability policy by introducing a simplified model of exchange and financial intermediation that captures the effects of shocks on financial and real sectors of the economy. The model allows us to explain essential mechanisms and interactions of financial and real economic variables in a comprehensive, yet intuitive fashion. Our results suggest that liquidity and default in the credit markets should be analyzed contemporaneously when financial, monetary and productivity shocks affect financial stability as well as the real economy. |
| spellingShingle | Martinez, S Tsomocos, D Liquidity and default in an exchange economy |
| title | Liquidity and default in an exchange economy |
| title_full | Liquidity and default in an exchange economy |
| title_fullStr | Liquidity and default in an exchange economy |
| title_full_unstemmed | Liquidity and default in an exchange economy |
| title_short | Liquidity and default in an exchange economy |
| title_sort | liquidity and default in an exchange economy |
| work_keys_str_mv | AT martinezs liquidityanddefaultinanexchangeeconomy AT tsomocosd liquidityanddefaultinanexchangeeconomy |