AbstractThis paper investigates the relation between liquidity and asset prices. It shows that, when banks balance sheets are marked to market and banks are targeting a financial leverage level - a situation similar to current environment - formation of Leverage Bubble phenomenon and suggests a new regulation rule based on a Dynamic Leverage Ratio (DLR) rule.
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Bibliographic InfoPaper provided by Université Panthéon-Sorbonne (Paris 1), Centre d'Economie de la Sorbonne in its series Documents de travail du Centre d'Economie de la Sorbonne with number 09039.
Length: 16 pages
Date of creation: May 2009
Date of revision:
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Financial crises; rational bubbles; dynamic leverage ratio; mark to market accounting; asset pricing; macroprudential regulation; market liquidity.;
Find related papers by JEL classification:
- G01 - Financial Economics - - General - - - Financial Crises
- G14 - Financial Economics - - General Financial Markets - - - Information and Market Efficiency; Event Studies; Insider Trading
- G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
- G20 - Financial Economics - - Financial Institutions and Services - - - General
- G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
This paper has been announced in the following NEP Reports:
- NEP-ACC-2009-06-17 (Accounting & Auditing)
- NEP-ALL-2009-06-17 (All new papers)
- NEP-BAN-2009-06-17 (Banking)
- NEP-CFN-2009-06-17 (Corporate Finance)
- NEP-FMK-2009-06-17 (Financial Markets)
- NEP-REG-2009-06-17 (Regulation)
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