Koralai Kirabaeva


February 17, 2011 Adverse Selection and Financial Crises

The recent financial crisis has highlighted the importance of adverse selection as a contributing factor to financial market instability.

Composition of International Capital Flows: A Survey

Staff Working Paper 2010-33 Koralai Kirabaeva, Assaf Razin
We survey several key mechanisms that explain the composition of international capital flows: foreign direct investment, foreign portfolio investment and debt flows (bank loans and bonds). In particular, we focus on the following market frictions: asymmetric information in capital markets and exposure to liquidity shocks.
Content Type(s): Staff Research, Staff Working Papers Topic(s): International topics JEL Code(s): D, D8, D82, F, F2, F21, F3, F34

Adverse Selection, Liquidity, and Market Breakdown

Staff Working Paper 2010-32 Koralai Kirabaeva
This paper studies the interaction between adverse selection, liquidity risk and beliefs about systemic risk in determining market liquidity, asset prices and welfare. Even a small amount of adverse selection in the asset market can lead to fire-sale pricing and possibly to a market breakdown if it is accompanied by a flight-to-liquidity, a misassessment of systemic risk, or uncertainty about asset values.

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