Marking to Market, Liquidity, and Financial Stability

Guillaume Plantin, Haresh Sapra and Hyun Song Shin
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Haresh Sapra: U Chicago

Monetary and Economic Studies, 2005, vol. 23, issue S1, 133-155

Abstract: This paper explores the financial stability implications of mark-to-market accounting, in particular its tendency to amplify financial cycles and the "reach for yield." Market prices play a dual role. Not only do they serve as a signal of the underlying fundamentals and the actions taken by market participants, they also serve a certification role and thereby influence these actions. When actions affect prices, and prices affect actions, the loop thus created can generate amplified responses--both in creating bubble-like booms in asset prices, and also in magnifying distress episodes in downturns.

JEL-codes: E31 E43 E44 E52 G20 G28 (search for similar items in EconPapers)
Date: 2005
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Citations: View citations in EconPapers (7)

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Working Paper: Marking to Market, Liquidity, and Financial Stability (2005)
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imemes:v:23:y:2005:i:s1:p:133-155

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