Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/299353 
Year of Publication: 
2024
Series/Report no.: 
Bank of Canada Staff Working Paper No. 2024-18
Publisher: 
Bank of Canada, Ottawa
Abstract: 
We provide a theory of fire sales in which potential buyers are subject to liquidity shocks and frictions that limit their ability to resell assets. The model predictions align with some stylized facts about the large sales of corporate bonds and Treasury securities during the COVID-19 economic crisis. The equilibrium is constrained efficient under weak conditions that apply if one interprets the key agents in the model as money market funds or mutual funds. Thus, as viewed through the lens of the model, the liquidity requirements proposed by the U. S. Securities and Exchange Commission for these intermediaries could hurt the economy.
Subjects: 
Asset pricing
Financial markets
Financial system regulation and policies
JEL: 
G12
G23
G28
Persistent Identifier of the first edition: 
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.