search query: @indexterm economic stability / total: 41
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| Author: | Gai, P. (et al.) |
| Title: | Financial innovation, macroeconomic stability and systematic crises |
| Journal: | Economic Journal
2008 : MAR, VOL. 118:527, p. 401-426 |
| Index terms: | credit management economic stability equilibrium analysis financial crises macroeconomic models |
| Language: | eng |
| Abstract: | This article provides a presentation of a general equilibrium model of intermediation which considers some of the key features of the modern financial system. The authors have included in the model financial constraints, state-contingent contracts, and pecuniary externality related with asset fire sales during periods of stress. This externality can create a systematic, self-fulfilling financial crisis in the event of severe shocks. The model implies that because of financial innovation and better macroeconomic stability the financial crises are less likely but potentially more severe than before. |
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