Fire Sales in Finance and Macroeconomics / Andrei Shleifer, Robert W. Vishny.

Format:

Book

Author/Creator:

Shleifer, Andrei.

Contributor:

National Bureau of Economic Research.

Vishny, Robert W.

Series:

Working Paper Series (National Bureau of Economic Research) no. w16642.

NBER working paper series no. w16642

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2010.

Summary:

Fire sales are forced sales of assets in which high-valuation bidders are sidelined, typically due to debt overhang problems afflicting many specialist bidders simultaneously. We overview theoretical and empirical research on asset fire sales, which shows how they can arise, how they can lead to asset under-valuations, how contracts and bankruptcy regimes adjust to the risk of fire sales, how fire sales can lead to downward spirals or cascades in asset prices, how arbitrage fails in the presence of fire sales, and how fire sales can reduce productive investment. We conclude by showing how asset fire sales shed light on several aspects of the recent financial crisis, and can account for the success of the liquidity provision and asset purchase policies of the Federal Reserve.

Notes:

Print version record

December 2010.