shocks. In a model that is capable of matching asset pricing moments, a short-lived shock that destroys a small fraction of … the economy's stock of pledgeable collateral generates a persistent recession, a stock market crash, and a flight …

We investigate the channel through which fluctuations in the market liquidity of real-sector repo collateral cause … productive capital as repo collateral to fund the margin for their arbitrage positions. A tiny drop in the market liquidity of … movements and losses. This further reduces the collateral value of arbitrage portfolios and triggers more fire-sales in both …

required to repay debt and finance new investments when the economy is hit by a negative shock. Moreover, the equilibrium may …

is countercyclical. As a result, theory implies a negative collateralizability premium; that is, capital that can be used … as collateral to relax financial constraints provides insurance against aggregate shocks and commands a lower risk …