IDEAS home Printed from https://ideas.repec.org/
MyIDEAS: Login to save this article or follow this journal

Leverage Cycles and the Anxious Economy

  • John Geanakoplos
  • Ana Fostel

We provide a pricing theory for emerging asset classes, like emerging markets, that are not yet mature enough to be attractive to the general public. We show how leverage cycles can cause contagion, flight to collateral, and issuance rationing in a frequently recurring phase we call the anxious economy. Our model provides an explanation for the volatile access of emerging economies to international financial markets, and for three stylized facts we identify in emerging markets and high yield data since the late 1990s. Our analytical framework is a general equilibrium model with heterogeneous agents, incomplete markets, and endogenous collateral, plus an extension encompassing adverse selection. (JEL D53, G12, G14, G15)

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.

File URL: http://www.aeaweb.org/articles.php?doi=10.1257/aer.98.4.1211
Download Restriction: no

File URL: http://www.aeaweb.org/aer/data/sept08/20060336_data.zip
Download Restriction: Access to full text is restricted to AEA members and institutional subscribers.

Article provided by American Economic Association in its journal American Economic Review.

Volume (Year): 98 (2008)
Issue (Month): 4 (September)
Pages: 1211-44

as
in new window

Handle: RePEc:aea:aecrev:v:98:y:2008:i:4:p:1211-44
Note: DOI: 10.1257/aer.98.4.1211
Contact details of provider: Web page: https://www.aeaweb.org/aer/
Email:


More information through EDIRC

Order Information: Web: https://www.aeaweb.org/subscribe.html

No references listed on IDEAS
You can help add them by filling out this form.

This item is featured on the following reading lists or Wikipedia pages:

  1. Leverage Cycles and the Anxious Economy (AER 2008) in ReplicationWiki
  2. Economic Logic blog

When requesting a correction, please mention this item's handle: RePEc:aea:aecrev:v:98:y:2008:i:4:p:1211-44. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Jane Voros)

or (Michael P. Albert)

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.

This information is provided to you by IDEAS at the Research Division of the Federal Reserve Bank of St. Louis using RePEc data.