Abstract

http://ssrn.com/abstract=1186342
 
 

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Marking to Market, Liquidity and Financial Stability


Guillaume Plantin


University of Toulouse 1 - Toulouse School of Economics (TSE)

Haresh Sapra


University of Chicago - Booth School of Business

Hyun Song Shin


Princeton University - Department of Economics

July 7, 2005


Abstract:     
This paper explores the financial stability implications of mark-to-market accounting, in particular its tendency to amplify financial cycles and the "reach for yield". Market prices play a dual role. Not only do they serve as a signal of the underlying fundamentals and the actions taken by market participants, they also serve a certification role and thereby influence these actions. When actions affect prices, and prices affect actions, the loop thus created can generate amplified responses - both in creating bubble-like booms in asset prices, and also in magnifying distress episodes in downturns.

Number of Pages in PDF File: 33

Keywords: Marking to market, accounting regime, monetary policy, financial stability

JEL Classification: G12, G21, G22, G28

working papers series


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Date posted: July 30, 2008  

Suggested Citation

Plantin, Guillaume and Sapra, Haresh and Shin, Hyun Song, Marking to Market, Liquidity and Financial Stability (July 7, 2005). Available at SSRN: http://ssrn.com/abstract=1186342 or http://dx.doi.org/10.2139/ssrn.1186342

Contact Information

Guillaume Plantin
University of Toulouse 1 - Toulouse School of Economics (TSE) ( email )
Place Anatole-France
Toulouse Cedex, F-31042
France
Haresh Sapra (Contact Author)
University of Chicago - Booth School of Business ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
Hyun Song Shin
Princeton University - Department of Economics ( email )
Princeton, NJ 08544-1021
United States

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