Credit rationing and the use of collateral are widely observed in debt financing. To our view there is yet no … collateral is limited. In our model we show that credit rationing and the use of collateral are always necessary for debt … resulting from the information asymmetry. Furthermore, we extend the set of possible collateral to property rights over physical …

-like in quiet times but become illiquid when uncertainty spikes. Shadow banking economizes on scarce collateral, expanding …-banking spreads, forcing the financial sector to switch to collateral-intensive funding. Shadow banking collapses, liquidity provision … recoveries, collateral runs, and flight-to-quality. It sheds light on LSAPs, Operation Twist, and other interventions …

collateral is scarce. We call this process shadow banking. A rise in uncertainty raises demand for crash-proof liquidity, forcing … intermediaries to delever and substitute toward safe, collateral- intensive liabilities. Shadow banking shrinks, causing the … liquidity supply to contract, discount rates and collateral premia spike, prices and investment fall. The model produces slow …