Abstract
Two alternative models of fire sales that yield the same aggregate predictions have different normative implications. If fire sales result from marginal misallocation, a pecuniary externality leads to ex-ante overinvestment. If they result from asymmetric information, the overinvestment result is reversed. However, there may be a tradeoff between present and future underinvestment. Ex-ante macroprudential policy may need to treat different types of investment differently, but ex-post intervention is useful in both cases.
Full Text
Accepted Version (
Free)
Published Version
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a call