Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/205309 
Year of Publication: 
2019
Series/Report no.: 
Tinbergen Institute Discussion Paper No. TI 2019-019/VII
Publisher: 
Tinbergen Institute, Amsterdam and Rotterdam
Abstract: 
This paper presents a simple and tractable equilibrium model of repos, where collateralized credit emerges under limited commitment. We show that even if there is no time variation in fundamentals, repo markets can fluctuate endogenously over time. In our theory, repo market fragilities are associated with endogenous fluctuations in trade probabilities, collateral values, and debt limits. We show that the collateral premium of a durable asset will become the lowest right before a recession and the highest right after the recession and that secured credit is acyclical.
Subjects: 
collateral
search
endogenous credit market fluctuations
JEL: 
E30
E50
C73
Document Type: 
Working Paper

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