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Balance Sheet Adjustments in the 2008 Crisis

Author

Listed:
  • Zhiguo He
  • In Gu Khang
  • Arvind Krishnamurthy

Abstract

We measure how securitized assets, including mortgage-backed securities and other asset-backed securities, have shifted across financial institutions over this crisis and how the availability of financing has accommodated such shifts. Sectors dependent on repo financing - in particular, the hedge fund and broker-dealer sector - have reduced asset holdings, while the commercial banking sector, which has had access to more stable funding sources, has increased asset holdings. The banking sector also increased its leverage dramatically over this crisis. These findings are important to understand the role played by the government during the crisis as well as to understand the factors determining asset prices and liquidity during the crisis.

Suggested Citation

  • Zhiguo He & In Gu Khang & Arvind Krishnamurthy, 2010. "Balance Sheet Adjustments in the 2008 Crisis," NBER Working Papers 15919, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:15919
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    References listed on IDEAS

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    1. 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.
    2. Zhiguo He & Arvind Krishnamurthy, 2013. "Intermediary Asset Pricing," American Economic Review, American Economic Association, vol. 103(2), pages 732-770, April.
    3. Zhigu He & Arvind Krishnamurthy, 2012. "A Model of Capital and Crises," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 79(2), pages 735-777.
    4. Bengt Holmstrom & Jean Tirole, 1998. "Private and Public Supply of Liquidity," Journal of Political Economy, University of Chicago Press, vol. 106(1), pages 1-40, February.
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    More about this item

    JEL classification:

    • E5 - Macroeconomics and Monetary Economics - - Monetary Policy, Central Banking, and the Supply of Money and Credit
    • G01 - Financial Economics - - General - - - Financial Crises
    • G2 - Financial Economics - - Financial Institutions and Services

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