Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/87078
Authors: 
Gautier, Pieter A.
Year of Publication: 
2009
Series/Report no.: 
Tinbergen Institute Discussion Paper 09-028/3
Abstract: 
In this note I argue that the desirability of fiscal policy in response to the current crisis depends on whether one views the current crisis as a temporary deviation from a unique equilibrium or as a bad equilibrium out of multiple equilibria. The paper presents a simple Diamond (1982) type of model where firms must find an (investment) bank to finance their projects and the investment banks sell risky assets to get capital from investors. Due to coordination frictions, the economy can get stuck in an inefficient low-trade equilibrium. Finally, I briefly discuss some of the policies that have recently been put forward to stimulate the economy in the context of this model.
Subjects: 
financial crisis
coordination frictions
macroeconomic complementarities
search frictions
JEL: 
E44
E62
J64
Document Type: 
Working Paper

Files in This Item:
File
Size
145.1 kB





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.