| Number |
CREPEDP-14 |
| Publication Date |
April 2018 |
| Title |
A Macroeconomic Model of Liquidity Crises
|
| Author(s) |
Keiichiro Kobayashi and Tomoyuki Nakajima |
| Abstract |
We develop a model of liquidity crises based on debt overhang and credit networks. Firms need liquidity for their operations. The default of a group of firms may cause a 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 to the deterioration in productivity.
|
| Keywords |
Systemic crises; liquidity demand; credit network; debt overhang
|
| Other information |
Paper in English (40 pages) |