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"What is the effect of fiancial crises and their resolution on banks' choice of liquid asset holdings? When risky assets have limited pledgeability and banks have relative expertise in employing risky assets, the market for these assets clears only at fire-sale prices following a large number of...
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. Anticipation of this generates an equilibrium featuring systemic risk in which all banks choose inefficiently high leverage to fund …
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risk in which all banks choose inefficiently high leverage to fund correlated assets and market discipline is compromised … ; systemic risk ; bailout ; forbearance ; moral hazard ; capital requirements …
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