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- W3125999729 abstract "We develop a general equilibrium model to analyze the interaction between two sectors with differing degree of financial friction in the context of liquidity injections (credit expansion). We show that excessive liquidity injection can overheat the sector with lower friction, crowding liquidity out of the sector with higher friction. The crowding-out manifests in a self-reinforcing spiral because of feedback between liquidity inflows, asset prices, and collateral values. The paper highlights the effect of financial frictions on the allocation and distribution of liquidity in an economy, demonstrating misallocation of liquidity (credit) under excessive liquidity injection." @default.
- W3125999729 created "2021-02-01" @default.
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- W3125999729 date "2018-04-01" @default.
- W3125999729 modified "2023-10-01" @default.
- W3125999729 title "Credit expansion and credit misallocation" @default.
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- W3125999729 doi "https://doi.org/10.1016/j.jmoneco.2017.09.012" @default.
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