Leverage, liquidity and crisis: A simulation study

We study the interactions of banks and ?rms within a leverage cycle to understand how capacity utilisation and capital investment interact with funding costs, leverage by banks and ?rms, and liquidity. We show in a simulation study that when ?rms can grow and die by becoming insolvent, and when banks can grow and die as their bad debts increase to unsustainable levels, the real economy cycles around a leverage cycle.

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Year of publication:	2012
Authors:	Godin, Antoine ; Kinsella, Stephen
Institutions:	Dipartimento di Economia e Management, Università degli Studi di Trento
Subject:	Leverage \| capital investment \| capacity utilization \| simulation modeling

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Series:	ASSRU Discussion Papers.
Type of publication:	Book / Working Paper
Language:	English
Notes:	Number 1205
Classification:	E22 - Capital; Investment (including Inventories); Capacity ; E32 - Business Fluctuations; Cycles ; E37 - Forecasting and Simulation
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10009421511