Citation

Discussion Paper Details

Please find the details for DP11544 in an easy to copy and paste format below:

Full Details   |   Bibliographic Reference

Full Details

Title: Financial Frictions, Asset Prices, and the Great Recession

Author(s): Zhen Huo and José-Víctor Ríos-Rull

Publication Date: September 2016

Keyword(s): Asset price, Balance Sheet Recession, Goods market frictions and Labor market frictions

Programme Area(s): Monetary Economics and Fluctuations

Abstract: We study financial shocks to households' ability to borrow in an economy that quantitatively replicates U.S. earnings, financial, and housing wealth distributions and the main macro aggregates. Such shocks generate large recessions via the negative wealth effect associated with the large drop in house prices triggered by the reduced access to credit of a large number of households. The model incorporates additional margins that are crucial for a large recession to occur: that it is difficult to reallocate production from consumption to investment or net exports, and that the reductions in consumption contribute to reductions in measured TFP.

For full details and related downloads, please visit: https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11544

Bibliographic Reference

Huo, Z and Ríos-Rull, J. 2016. 'Financial Frictions, Asset Prices, and the Great Recession'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=11544