NDLI: Number 96 0 December 2008 Sudden Stops , Financial Crises and Leverage : A Fisherian Deflation of Tobin ’ s Q *

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Number 96 0 December 2008 Sudden Stops , Financial Crises and Leverage : A Fisherian Deflation of Tobin ’ s Q *

Content Provider	Semantic Scholar
Author	Mendoza, Enrique G. Kehoe, Tim Kocherlakota, Narayana Nicolini, Juan Pablo Quadrini, Vincenzo Riascos, Alvaro
Copyright Year	2008
Abstract	This paper shows that the quantitative predictions of a DSGE model with an endogenous collateral constraint are consistent with key features of the emerging markets’ Sudden Stops. Business cycle dynamics produce periods of expansion during which the ratio of debt to asset values raises enough to trigger the constraint. This sets in motion a deflation of Tobin’s Q driven by Irving Fisher’s debt-deflation mechanism, which causes a spiraling decline in credit access and in the price and quantity of collateral assets. Output and factor allocations decline because the collateral constraint limits access to working capital financing. This credit constraint induces significant amplification and asymmetry in the responses of macro-aggregates to shocks. Because of precautionary saving, Sudden Stops are low probability events nested within normal cycles in the long run.
File Format	PDF HTM / HTML
DOI	10.3386/w14444
Alternate Webpage(s)	https://www.frbatlanta.org/-/media/documents/news/conferences/2009/09qampoe/mendoza.pdf
Alternate Webpage(s)	http://www.frbatlanta.org/news/CONFEREN/09qampoe/mendoza.pdf
Alternate Webpage(s)	https://www.aeaweb.org/conference/2009/retrieve.php?pdfid=91
Alternate Webpage(s)	https://www.federalreserve.gov/pubs/ifdp/2008/960/ifdp960.pdf
Alternate Webpage(s)	http://www.federalreserve.gov/pubs/ifdp/2008/960/ifdp960.pdf
Alternate Webpage(s)	http://www.aeaweb.org/annual_mtg_papers/2009/retrieve.php?pdfid=91
Alternate Webpage(s)	http://www.aeaweb.org/assa/2009/retrieve.php?pdfid=91
Alternate Webpage(s)	https://doi.org/10.3386/w14444
Language	English
Access Restriction	Open
Content Type	Text
Resource Type	Article

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