Last edited by Akinorisar
Saturday, August 1, 2020 | History

3 edition of Quantitative implication of a debt-deflation theory of sudden stops and asset prices found in the catalog.

Quantitative implication of a debt-deflation theory of sudden stops and asset prices

Mendoza, Enrique G.

Quantitative implication of a debt-deflation theory of sudden stops and asset prices

by Mendoza, Enrique G.

  • 155 Want to read
  • 39 Currently reading

Published by National Bureau of Economic Research in Cambridge, Mass .
Written in English

    Subjects:
  • Business cycles -- Developing countries -- Econometric models

  • Edition Notes

    StatementEnrique G. Mendoza, Katherine A. Smith.
    SeriesNBER working paper series -- no. 10940., Working paper series (National Bureau of Economic Research) -- working paper no. 10940.
    ContributionsSmith, Katherine A., National Bureau of Economic Research.
    The Physical Object
    Pagination34, [12] p. :
    Number of Pages34
    ID Numbers
    Open LibraryOL17625273M
    OCLC/WorldCa57349630

      Not really a book this, more a tract; 25 pages in large type in which Irving Fisher (of the infamous ""Stock prices have reached what looks like a permanently high plateau" just before the stock crash) lays down 49 precepts of the theory and evolution of debt s: The massive sale of assets lowers their prices and fuels deflation. This is an additional loss for economic agents. Deflation is self-sustaining and that is why it is very difficult to get out of it. For Fisher, this theory of debt deflation explains all economic crises.

    Debt deflation is a theory that recessions and depressions are due to the overall level of debt rising in real value because of deflation, causing people to default on their consumer loans and mortgages. Bank assets fall because of the defaults and because the value of their collateral falls, leading to a surge in bank insolvencies, a reduction in lending and by extension, a reduction in.   Debt deflation is a scenario wherein the collateral which you keep while taking a loan depreciates in value. This puts the loan agreement made earlier in jeopardy. For example Many of us purchase a house by taking out a mortgage. Now the collatera.

      Later on in he came up with his Debt Deflation Theory which he concluded was the cause of the Great Depression. Most other economists thought — and still think — deflation resulted from it. Sidebar: Go to any modern day textbook on economics and see where the author talks about any debt let alone excessive debt. Debt deflation process: Debt deflation process is the process which is first identified by Irving Fisher in which a cycle of falling asset price and falling prices of goods and services can increase the severity of an economic downturn. Debt deflation means the fall in the asset prices that leads to fall in the cost of goods and services.


Share this book
You might also like
Poetry & prose

Poetry & prose

Gods & monsters

Gods & monsters

Recent advances in surgery.

Recent advances in surgery.

Significant women of Meredith

Significant women of Meredith

International Directory of Company Histories

International Directory of Company Histories

Baseball by the books

Baseball by the books

Literacy in the United States

Literacy in the United States

Island Technology

Island Technology

History, Jurisdiction, and Summary of Legislative Activities of the United States Senate, Committee Print, S.Pr. 101-148, 101st Congress, Second Session, 1989-1990.

History, Jurisdiction, and Summary of Legislative Activities of the United States Senate, Committee Print, S.Pr. 101-148, 101st Congress, Second Session, 1989-1990.

8th International Congress on Catalysis.

8th International Congress on Catalysis.

The organisation of a medical advisory structure;

The organisation of a medical advisory structure;

Correspondence returns and other papers relating to Canada and to the Indian problem therein, 1839.

Correspondence returns and other papers relating to Canada and to the Indian problem therein, 1839.

life of faith

life of faith

Quantitative implication of a debt-deflation theory of sudden stops and asset prices by Mendoza, Enrique G. Download PDF EPUB FB2

Published: Mendoza, Enrique G. & Smith, Katherine A., "Quantitative implications of a debt-deflation theory of Sudden Stops and asset prices," Journal of International Economics, Elsevier, vol.

70(1), pagesSeptember. citation courtesy of. Users who downloaded this paper also downloaded* these. Quantitative implications of a debt-deflation theory of Sudden Stops and asset prices.

An important implication of the incompleteness of asset markets is that, Katherine A. SmithQuantitative Implications of a Debt-Deflation Theory of Sudden Stops and Asset Prices.

NBER Working Paper, vol.National Bureau of Economic Research Cited by: Get this from a library. Quantitative implication of a debt-deflation theory of sudden stops and asset prices.

[Enrique G Mendoza; Katherine A Smith; National Bureau of Economic Research.]. Enrique G. Mendoza & Katherine A. Smith, "Quantitative Implication of A Debt-Deflation Theory of Sudden Stops and Asset Prices," NBER Working. Request PDF | Quantitative Implications of a Debt-Deflation Theory of Sudden Stops and Asset Prices | This paper shows that the quantitative predictions of an equilibrium asset-pricing model with.

This paper shows that the quantitative predictions of an equilibrium asset-pricing model with financial frictions are consistent with key features of the Sudden Stop phenomenon.

Foreign traders incur costs in trading assets with domestic agents, and a collateral constraint limits external debt to a fraction of the market value of domestic equity holdings.

With high leverage and a liquid market, the shocks force “fire sales” of assets and Fisher's debt-deflation mechanism amplifies the responses of asset prices, consumption and the current account.

Precautionary saving makes these Sudden Stops infrequent in the long run. Quantitative Implication of A Debt-Deflation Theory of Sudden Stops and Asset Prices Enrique G.

Mendoza and Katherine A. Smith NBER Working Paper No. December JEL No. F41, F32, E44, D52 ABSTRACT This paper shows that the quantitative predictions of an equilibrium asset. The quantitative debt-deflation models of Sudden Stops yield three key lessons: (1) Sudden Stops emerge endogenously without large, unexpected shocks.

They are an endogenous outcome in environments in which agents plan their actions taking credit constraints and expectations of Sudden Stops into account.

“Endogenous Sudden Stops in a Business Cycle Model with Collateral Con-straints: A Fisherian Deflation of Tobin’s Q.” National Bureau of Economic Research Working Paper Mendoza, “Quantitative Implications of a Debt-Deflation TheEnrique G., and Katherine A.

Smith. - ory of Sudden Stops and Asset Prices.”. Sudden Stops are defined by unusually large recessions marked by: sharp, abrupt current account reversals, large contractions in output and absorption, and collapses in goods and asset prices.

In Mexico’s Sudden Stop, for example, the current account shifted by nearly 9 percentage points of GDP, and GDP, consumption and investment fell.

Get this from a library. Quantitative implication of a debt-deflation theory of sudden stops and asset prices. [Enrique G Mendoza; Katherine A Smith; National Bureau of Economic Research.] -- "This paper shows that the quantitative predictions of an equilibrium asset pricing model with financial frictions are consistent with the large consumption and current-account reversals and.

Debt Deflation: A situation in which the collateral used to secure a loan (or another form of debt) decreases in value. This can be detrimental because it may lead to a restructuring of the loan. King M. () Debt-Deflation: Theory and Evidence. In: Capie F., Wood G.E.

(eds) Asset Prices and the Real Economy. Studies in Banking and International Finance. The quantitative predictions of these models yield three key lessons: (1) Sudden Stops can occur as an endogenous response to typical realizations of adverse shocks to fundamentals, in.

Lessons from the debt-deflation theory of sudden stops () Cached. Download Links [] [] sudden stop debt-deflation theory full credit short section explicit permission national bureau economic research. Mendoza notes that a Sudden Stop - in which asset prices collapse while both consumption and capital investments fell sharply - is consequently triggered by this vicious cycle.

This mechanism is almost identical to the one identified by Irving Fisher's debt deflation theory, which was developed in to explain the U.S.

Great Depression. tistically, what may be called a debt-deflation theory of great depres-sions. In the preface, I stated that the results "seem largely new," I spoke thus cautiously because of my unfamiliarity with the vast literature on the subject.

Since the book was published its special con-clusions have been widely accepted and, so far as I know, no one has. According to the debt deflation theory, a sequence of effects of the debt bubble bursting occurs: 1.

Debt liquidation and distress selling. Contraction of the money supply as bank loans are paid off. A fall in the level of asset prices. A still greater fall in the net worth of businesses, precipitating bankruptcies.

A fall in. InIrving Fisher, possibly the first celebrity economist, published his paper titled “The Debt-Deflation Theory of Great Depressions,” a thorough reading of which should be required by. According to the debt deflation theory, a sequence of effects of the debt bubble bursting occurs: 1.

Debt liquidation and distress selling. 2. Contraction of the money supply as bank loans are paid off. 3. A fall in the level of asset prices. 4. A still greater fall in the net worth of businesses, precipitating bankruptcies.

5. A fall in Reviews: Irving Fisher was an American economist, inventor, and social campaigner. He was one of the earliest American neoclassical economists, though his later work on debt deflation has been embraced by the Post-Keynesian school.

Fisher made important contributions to utility theory and general equilibrium/5(8).Not really a book this, more a tract; 25 pages in large type in which Irving Fisher (of the infamous ""Stock prices have reached what looks like a permanently high plateau" just before the stock crash) lays down 49 precepts of the theory and evolution of debt s: