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Leverage and Asset Bubbles: Averting Armageddon with Chapter 11? / Marcus Miller, Joseph E. Stiglitz.
- Format:
- Book
- Author/Creator:
- Miller, Marcus.
- Series:
- Working Paper Series (National Bureau of Economic Research) no. w15817.
- NBER working paper series no. w15817
- Language:
- English
- Physical Description:
- 1 online resource: illustrations (black and white);
- Other Title:
- Leverage and Asset Bubbles
- Place of Publication:
- Cambridge, Mass. National Bureau of Economic Research 2010.
- Summary:
- An iconic model with high leverage and overvalued collateral assets is used to illustrate the amplification mechanism driving asset prices to 'overshoot' equilibrium when an asset bubble bursts--threatening widespread insolvency and what Richard Koo calls a 'balance sheet recession'.
- Besides interest rates cuts, asset purchases and capital restructuring are key to crisis resolution. The usual bankruptcy procedures for doing this fail to internalise the price effects of asset 'fire-sales' to pay down debts, however. We discuss how official intervention in the form of 'super' Chapter 11 actions can help prevent asset price correction causing widespread economic disruption.
- Notes:
- Print version record
- March 2010.
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