01949cas a2200253 a 4500 AALejournalIMF005206 230101c9999 xx r poo 0 0eng d 5.00 USD 9781451870442 1018-5941 BD-DhAAL BD-DhAAL Tong, Hui. Real Effects of the Subprime Mortgage Crisis : Is it a Demand or a Finance Shock? / Hui Tong, Shang-Jin Wei. Washington, D.C. : International Monetary Fund, 2008. 1 online resource (37 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 We develop a methodology to study how the subprime crisis spills over to the real economy. Does it manifest itself primarily through reducing consumer demand or through tightening liquidity constraint on non-financial firms? Since most non-financial firms have much larger cash holding than before, they appear unlikely to face significant liquidity constraint. We propose a methodology to estimate these two channels of spillovers. We first propose an index of a firm's sensitivity to consumer demand, based on its response to the 9/11 shock in 2001. We then construct a separate firm-level index on financial constraint based on Whited and Wu (2006). We find that both channels are at work, but a tightened liquidity squeeze is economically more important than a reduced consumer spending in explaining cross firm differences in stock price declines. Mode of access: Internet Wei, Shang-Jin. IMF Working Papers; Working Paper ; No. 2008/186 Full text available on IMF http://elibrary.imf.org/view/journals/001/2008/186/001.2008.issue-186-en.xml IMF e-Library