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This paper studies the welfare properties of competitive equilibria in an economy with incomplete markets subject to idiosyncratic and aggregate shocks. We focus on the role of securitization, whereby borrowers can reduce idiosyncratic asset risk, which enables increased leverage and investment....
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A unique legal reform in 2004 in Sweden redistributed collateral rights from banks holding floating liens to unsecured …, we document that a zero-sum redistribution of collateral rights and the resulting reduction in collateral capacity …
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When firms are able to pledge their assets as collateral, investment and borrowing become endogenous: pledgeable assets …
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