A macroeconomic model of liquidity crises

Keiichiro Kobayashi and Tomoyuki Nakajima

No 17-010E, CIGS Working Paper Series from The Canon Institute for Global Studies

Abstract: We develop a model of liquidity crises based on debt overhang and credit networks. Firms need liquidity for its operation. Defaults of a group of fi rms may cause chain reaction of defaults of banks and firms through a credit network. Our model is consistent with the observation that the decline in output during the Great Recession is mostly attributable to the deterioration in the labor wedge, rather than in productivity.

Pages: 39
Date: 2017-10
New Economics Papers: this item is included in nep-mac
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Related works:
Working Paper: A macroeconomic model of liquidity crises (2014)
Working Paper: A macroeconomic model of liquidity crises (2014)
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