TITLE

Collateral equilibrium, I: a basic framework

AUTHOR(S)
Geanakoplos, John; Zame, William
PUB. DATE
August 2014
SOURCE
Economic Theory;Aug2014, Vol. 56 Issue 3, p443
SOURCE TYPE
Academic Journal
DOC. TYPE
Article
ABSTRACT
Much of the lending in modern economies is secured by some form of collateral: residential and commercial mortgages and corporate bonds are familiar examples. This paper builds an extension of general equilibrium theory that incorporates durable goods, collateralized securities, and the possibility of default to argue that the reliance on collateral to secure loans and the particular collateral requirements chosen by the social planner or by the market have a profound impact on prices, allocations, market structure, and the efficiency of market outcomes. These findings provide insights into housing and mortgage markets, including the subprime mortgage market.
ACCESSION #
97194023

 

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