01629cas a2200241 a 4500 AALejournalIMF001294 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451854817 1018-5941 BD-DhAAL BD-DhAAL Schellekens, Philip. Costly Collateral and the Public Supply of Liquidity / Philip Schellekens. Washington, D.C. : International Monetary Fund, 2000. 1 online resource (24 pages) IMF Working Papers <strong>Off-Campus Access:</strong> No User ID or Password Required <strong>On-Campus Access:</strong> No User ID or Password Required Electronic access restricted to authorized BRAC University faculty, staff and students This paper addresses two complications arising from the use of collateral requirements in debt contracts between wealth-constrained entrepreneurs and banks. First, costly asset liquidation is found to enhance the susceptibility of debt finance to interest rate volatility. Second, aggregate uncertainty in conjunction with limited bank capitalization is shown to produce excessive credit constraints that, under certain conditions, justify the public supply of liquidity. The paper suggests applications with respect to models of interest rate smoothing and self-fulfilling currency crises. Mode of access: Internet IMF Working Papers; Working Paper ; No. 2000/125 Full text available on IMF http://elibrary.imf.org/view/journals/001/2000/125/001.2000.issue-125-en.xml IMF e-Library