Hidden Bibliographic Details
| Other authors / contributors: | Mendoza, Enrique G., 1963- author.
International Monetary Fund. Research Department, issuing body.
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| ISBN: | 1283570408
9781283570404
9781455249855
1455249858
1462388019
9781462388011
9786613882851
6613882852
1455271047
9781455271047
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| Notes: | Includes bibliographical references.
English.
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| Summary: | This paper studies overborrowing, financial crises and macro-prudential policy in an equilibrium model of business cycles and asset prices with collateral constraints. Agents in a decentralized competitive equilibrium do no internalize the negative effects of asset fire-sales on the value of other agents' assets and hence they borrow too much ex ante, compared with a constrained social planner who internalizes these effects. Average debt and leverage ratios are slightly larger in the competitive equilibrium, both the incidence and magnitude of financial crises are much larger. Excess asset returns, Sharpe ratios and the market price of risk are also much larger. State-contingent taxes on debt and dividends of about 1 and -0.5 percent on average respectively support the planner's allocations as a competitive equilibrium and increase social welfare.
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| Other form: | Print version: Mendoza, Enrique G. Overborrowing, Financial Crises and?Macro-prudential' Policy? Washington : International Monetary Fund, ©2011 9781455216710
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