Collateral equilibrium, I: a basic framework

Economic Theory - Tập 56 - Trang 443-492 - 2013
John Geanakoplos1,2, William R. Zame3,4
1Santa Fe Institute, Santa Fe, USA
2Yale University, New Haven, USA
3UCLA, Los Angeles, USA
4EIEF, Rome, Italy

Tóm tắt

Much of the lending in modern economies is secured by some form of collateral: residential and commercial mortgages and corporate bonds are familiar examples. This paper builds an extension of general equilibrium theory that incorporates durable goods, collateralized securities, and the possibility of default to argue that the reliance on collateral to secure loans and the particular collateral requirements chosen by the social planner or by the market have a profound impact on prices, allocations, market structure, and the efficiency of market outcomes. These findings provide insights into housing and mortgage markets, including the subprime mortgage market.

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Economic Theory

Tập 56

443-492

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