Fragility of resale markets for securitized assets and policy of asset purchases [electronic resource] / by Martin Kuncl
- Author
- Kuncl, Martin
- Published
- [Ottawa] : Bank of Canada, [2016]
- Copyright Date
- ©2016
- Physical Description
- ii, 57 pages
- Additional Creators
- Bank of Canada
Access Online
- publications.gc.ca , Free-to-read
- Series
- Language Note
- Includes abstract in French.
- Restrictions on Access
- Free-to-read Unrestricted online access
- Summary
- "Markets for securitized assets were characterized by high liquidity prior to the recent financial crisis and by a sudden market dry-up at the onset of the crisis. A generalequilibrium model with heterogeneous investment opportunities and information frictionspredicts that, in boom periods or mild recessions, the degree of adverse selection in resale markets for securitized assets is limited because of the reputation-based guarantees by asset originators. This supports investment and output. However, in a deep recession, characterized by high dispersion of asset qualities, there is a sudden surge in adverse selection due to an economy-wide default on reputation-based guarantees, which persistently depresses the output in the economy. Government policy of asset purchases limits the negative effects of adverse selection on the real economy, but may create a negative moral hazard problem"--Abstract, p. ii.
- Report Numbers
- FB3-5/2016-46E-PDF
- Other Subject(s)
- Note
- "October 2016."
- Bibliography Note
- Includes bibliographical references (pages 35-37).
- Type of File/Data
- Electronic monograph in PDF format.
View MARC record | catkey: 24803618