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Funding Externalities, Asset Prices And Investors' "Search For Yield"

Author

Listed:
  • Prasanna Gai
  • Kamakshya Trivedi
Abstract
This note presents a simple model that nests the “excess liquidity” and “savings glut” hypotheses of the debate on the recent asset price boom. It clarifies the notion of investors’ ‘search for yield’ and shows how financial frictions influence asset price dynamics.

Suggested Citation

  • Prasanna Gai & Kamakshya Trivedi, 2008. "Funding Externalities, Asset Prices And Investors' "Search For Yield"," CAMA Working Papers 2008-12, Centre for Applied Macroeconomic Analysis, Crawford School of Public Policy, The Australian National University.
    • Handle: RePEc:een:camaaa:2008-12
    as

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    File URL: https://cama.crawford.anu.edu.au/sites/default/files/publication/cama_crawford_anu_edu_au/2021-06/12_gai_trivedi_2008.pdf
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    References listed on IDEAS

    as
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    3. Paul Krugman, 1991. "History versus Expectations," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 106(2), pages 651-667.
    4. Michael P. Dooley & David Folkerts-Landau & Peter M. Garber, 2005. "An essay on the revived Bretton Woods system," Proceedings, Federal Reserve Bank of San Francisco, issue Feb.
    5. Markus K. Brunnermeier & Lasse Heje Pedersen, 2009. "Market Liquidity and Funding Liquidity," The Review of Financial Studies, Society for Financial Studies, vol. 22(6), pages 2201-2238, June.
    6. Ross Levine, 1997. "Financial Development and Economic Growth: Views and Agenda," Journal of Economic Literature, American Economic Association, vol. 35(2), pages 688-726, June.
    7. Hyun Song Shin, 2005. "Liquidity and Twin Crises," Economic Notes, Banca Monte dei Paschi di Siena SpA, vol. 34(3), pages 257-277, November.
    8. Gabriele Galati & Alexandra Heath & Patrick McGuire, 2007. "Evidence of carry trade activity," BIS Quarterly Review, Bank for International Settlements, September.
    9. Gabriele Galati & Michael Melvin, 2004. "Why has FX trading surged?," BIS Quarterly Review, Bank for International Settlements, December.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    JEL classification:

    • G15 - Financial Economics - - General Financial Markets - - - International Financial Markets
    • E44 - Macroeconomics and Monetary Economics - - Money and Interest Rates - - - Financial Markets and the Macroeconomy
    • E58 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit - - - Central Banks and Their Policies

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