Portfolio Shifts, Asset Price Declines, and Liquidity Lock

William Van Lear

International Journal of Political Economy, 2010, vol. 39, issue 3, 64-80

Abstract: This paper adds to the explanation of financial crises by employing the concepts of liquidity lock, portfolio shifting, and the wealth effect in the context of the 2007-9 financial crisis and of internationalized money manager capitalism. The paper reviews four major crisis theories and follows with a summary account of the recent financial crisis. The paper constructs a model in which portfolio shifts driven by perceived changes in risk and return are instrumental in creating liquidity lock. Sharp asset price changes affect net worth and aggregate demand, creating policy difficulties for economic leaders. The paper ends by addressing the competing options available to policymakers in late 2008 and 2009.

Date: 2010
References: Add references at CitEc
Citations:

Downloads: (external link)
http://hdl.handle.net/10.2753/IJP0891-1916390304 (text/html)
Access to full text is restricted to subscribers.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:mes:ijpoec:v:39:y:2010:i:3:p:64-80

Ordering information: This journal article can be ordered from
http://www.tandfonline.com/pricing/journal/MIJP20

DOI: 10.2753/IJP0891-1916390304

Access Statistics for this article

More articles in International Journal of Political Economy from Taylor & Francis Journals
Bibliographic data for series maintained by Chris Longhurst ().