Economics at your fingertips  

Financial constraints and collateral crises

Luis Araujo (), Bernardo Guimaraes and Diego de Sousa Rodrigues ()

Review of Economic Dynamics, 2020, vol. 38, 238-250

Abstract: Assessing the fundamental value of a wide range of asset-backed securities is costly. As a result, these assets can become information insensitive, which allows them to be used as collateral in credit transactions. In this paper, we show that while it is true that information-insensitive assets can play a liquidity role, the fact that they play this role reinforces their information insensitivity. This implies that the availability of alternative ways of financing can harm the liquidity role of assets, even if these alternatives are costly and not used in equilibrium. The reason is that such options raise the asset's sensitivity to information by increasing the relative importance of their fundamental value vis-a-vis their role as collateral. (Copyright: Elsevier)

Keywords: Financial crises; Asset-backed securities; Opacity; Private money (search for similar items in EconPapers)
JEL-codes: E32 E44 G01 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
Access to full texts is restricted to ScienceDirect subscribers and institutional members. See for details.

Related works:
Software Item: Code and data files for "Financial constraints and collateral crises" (2020) Downloads
Working Paper: Financial constraints and collateral crises (2020) Downloads
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:

Ordering information: This journal article can be ordered from
https://www.economic ... ription-information/

DOI: 10.1016/

Access Statistics for this article

Review of Economic Dynamics is currently edited by Loukas Karabarbounis

More articles in Review of Economic Dynamics from Elsevier for the Society for Economic Dynamics Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().

Page updated 2021-09-10
Handle: RePEc:red:issued:19-225