Fragility of resale markets for securitized assets and policy of asset purchases / by Martin Kuncl. : FB3-5/2016-46E-PDF

"Markets for securitized assets were characterized by high liquidity prior to the recent financial crisis and by a sudden market dry-up at the onset of the crisis. A generalequilibrium model with heterogeneous investment opportunities and information frictionspredicts that, in boom periods or mild recessions, the degree of adverse selection in resale markets for securitized assets is limited because of the reputation-based guarantees by asset originators. This supports investment and output. However, in a deep recession, characterized by high dispersion of asset qualities, there is a sudden surge in adverse selection due to an economy-wide default on reputation-based guarantees, which persistently depresses the output in the economy. Government policy of asset purchases limits the negative effects of adverse selection on the real economy, but may create a negative moral hazard problem"--Abstract, p. ii.

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Renseignements sur la publication
Ministère/Organisme Bank of Canada.
Titre Fragility of resale markets for securitized assets and policy of asset purchases / by Martin Kuncl.
Titre de la série Staff working paper, 1701-9397 ; 2016-46
Type de publication Série - Voir l'enregistrement principal
Langue [Anglais]
Format Électronique
Document électronique
Note(s) "October 2016."
Includes bibliographical references (p. 35-37).
Includes abstract in French.
Information sur la publication [Ottawa] : Bank of Canada, c2016.
Auteur / Contributeur Kuncl, Martin.
Description ii, 57 p.
Numéro de catalogue
  • FB3-5/2016-46E-PDF
Descripteurs Capital markets
Financial crisis
Government policy
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