In the presence of macroeconomic shocks severe enough to threaten the liquidity or solvency of the banking system, the …

maturities with the risk of systemic crises. Pecuniary externalities make unregulated debt maturities inefficiently short. The …

This paper introduces agent heterogeneity, liquidity, and endogenous default to a DSGE framework. Our model allows for … the economy. Due to liquidity and endogenous default, the transmission mechanism of shocks is well defined, and their …

In standard Walrasian macro-finance models, pecuniary externalities such as fire sales lead to overinvestment in … illiquid assets or underprovision of liquidity. We investigate whether imperfect competition (Cournot) improves welfare through … internalizing the externality and find that this is far from guaranteed. In a standard model of liquidity shocks, when liquidity is …

liquidity and solvency shocks. It explains the asset price anomalies and bank lending freeze during the crisis. The paper shows …

We provide a theory to investigate the implications of time-varying bailout policy for rational bubbles in an infinite … assets can alleviate firms' credit constraint and enhance investment efficiency with additional liquidity. However, asset …