Regulating Asset Price Risk
AbstractThere has been a long debate about whether speculators are stabilizing or not. We consider a model where speculators have a stabilizing role in normal times, but may also provoke large risk panics. The very feature that makes arbitrageurs liquidity providers in normal times, namely their tolerance of risk, enables a large increase in asset price risk during a financial panic. We show that a policy that discourages balance sheet risk reduces the magnitude of financial panics, as well as asset price risk in both normal and panic states.
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Bibliographic InfoArticle provided by American Economic Association in its journal American Economic Review.
Volume (Year): 101 (2011)
Issue (Month): 3 (May)
Other versions of this item:
- Philippe Bacchetta & Cédric Tille & Eric van Wincoop, 2011. "Regulating Asset Price Risk," Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP) 11.02, Université de Lausanne, Faculté des HEC, DEEP.
- Philippe BACCHETTA & Cedric TILLE & Eric VAN WINCOOP, . "Regulating Asset Price Risk," Swiss Finance Institute Research Paper Series 11-04, Swiss Finance Institute.
- Philippe Bacchetta, Cédric Tille, Eric van Wincoop, 2011. "Regulating Asset Price Risk," IHEID Working Papers 02-2011, Economics Section, The Graduate Institute of International Studies.
- E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
- G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Philippe Bacchetta & Cédric Tille & Eric van Wincoop, 2010.
"Self-Fulfilling Risk Panics,"
Cahiers de Recherches Economiques du DÃ©partement d'EconomÃ©trie et d'Economie politique (DEEP)
10.05, Université de Lausanne, Faculté des HEC, DEEP.
- Philippe Bacchetta, Cedric Tille, Eric van Wincoop, 2010. "Self-Fulfilling Risk Panics," IHEID Working Papers 17-2010, Economics Section, The Graduate Institute of International Studies.
- Philippe Bacchetta & Cédric Tille & Eric van Wincoop, 2010. "Self-Fulfilling Risk Panics," NBER Working Papers 16159, National Bureau of Economic Research, Inc.
- Bacchetta, Philippe & Tille, Cédric & Wincoop, Eric, 2011. "Self-Fulfilling Risk Panics," Working Papers 2011-003, Banco Central de Reserva del Perú.
- Eric van Wincoop & Cédric Tille & Philippe Bacchetta, 2011. "Self-fulfilling risk panics," 2011 Meeting Papers 186, Society for Economic Dynamics.
- Philippe Bacchetta & Cedric Tille & Eric van Wincoop, 2010. "Self-Fulfilling Risk Panics," Working Papers 282010, Hong Kong Institute for Monetary Research.
- Bacchetta, Philippe & Tille, Cédric & van Wincoop, Eric, 2010. "Self-Fulfilling Risk Panics," CEPR Discussion Papers 7920, C.E.P.R. Discussion Papers.
- Stephen Morris & Hyun Song Shin, 2008. "Financial Regulation in a System Context," Brookings Papers on Economic Activity, Economic Studies Program, The Brookings Institution, vol. 39(2 (Fall)), pages 229-274.
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