The Evolution of a Financial Crisis: Collapse of the Asset-Backed Commercial Paper Market

55 Pages Posted: 22 Mar 2009 Last revised: 12 Apr 2012

See all articles by Daniel M. Covitz

Daniel M. Covitz

Board of Governors of the Federal Reserve System

Nellie Liang

Brookings Institution

Gustavo Suarez

Board of Governors of the Federal Reserve System

Multiple version iconThere are 2 versions of this paper

Date Written: April 5, 2012

Abstract

This paper documents “runs” on asset-backed commercial paper (ABCP) programs using a novel dataset of all transactions in the U.S. market during its severe contraction in 2007. We find that one-third of programs were run within weeks of the onset of the ABCP crisis and that runs, as well as yields and maturities for new issues, were related to program-level and macro-financial risks. The findings are consistent with the asymmetric information framework used to explain banking panics, have implications for the degree of risk-intolerance of commercial paper investors, and inform upon empirical predictions of recent papers on dynamic coordination failures.

Keywords: Commercial paper, asset-backed commercial paper, bank runs, financial crisis

JEL Classification: G01, G10, G21

Suggested Citation

Covitz, Daniel M. and Liang, Nellie and Suarez, Gustavo, The Evolution of a Financial Crisis: Collapse of the Asset-Backed Commercial Paper Market (April 5, 2012). Journal of Finance, Forthcoming, Available at SSRN: https://ssrn.com/abstract=1364576 or http://dx.doi.org/10.2139/ssrn.1364576

Daniel M. Covitz (Contact Author)

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States
202-452-5267 (Phone)
202-452-5295 (Fax)

Nellie Liang

Brookings Institution

1775 Massachusetts Ave, NW
Washington, DC 20036
United States

Gustavo Suarez

Board of Governors of the Federal Reserve System ( email )

20th Street and Constitution Avenue NW
Washington, DC 20551
United States

Do you have a job opening that you would like to promote on SSRN?

Paper statistics

Downloads
1,667
Abstract Views
6,864
rank
13,178
PlumX Metrics