Externalities and financial crisis – enough to cause collapse?
Marcus Miller and
Additional contact information
Lei Zhang: Sichuan University
CRETA Online Discussion Paper Series from Centre for Research in Economic Theory and its Applications CRETA
After the boom in US subprime lending came the bust - with a run on US shadow banks. The magnitude of boom and bust were, it seems, amplified by two significant externalities triggered by aggregate shocks: the endogeneity of bank equity due to mark-to-market accounting and of bank liquidity due to ‘fire-sales’ of securitised assets. We show how adding a systemic ‘bank run’ to the canonical model of Adrian and Shin allows for a tractable analytical treatment - including the counterfactual of complete collapse that forces the Treasury and the Fed to intervene
Keywords: pecuniary externalities; bank runs; illiquidity; Lender of Last Resort; cross-border banking Jel Classification: G01; G11; G24 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-ban
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1) Track citations by RSS feed
Downloads: (external link)
https://warwick.ac.uk/fac/soc/economics/research/c ... _-_marcus_miller.pdf
Working Paper: Externalities and financial crisis - enough to cause collapse? (2019)
Working Paper: Externalities and financial crisis – enough to cause collapse? (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:wrk:wcreta:51
Access Statistics for this paper
More papers in CRETA Online Discussion Paper Series from Centre for Research in Economic Theory and its Applications CRETA Contact information at EDIRC.
Bibliographic data for series maintained by Margaret Nash ().