Journal Article

Why do markets freeze?

Abstract: In normal times, investors buy and sell financial assets because there are gains from trade. However, markets do not always function properly ? they sometimes ?freeze.? An example is the collapse of trading in mortgage-backed securities during the recent financial crisis. Why does trade break down despite the potential gains from trade? Can the government intervene to restore the normal functioning of markets? In ?Why Do Markets Freeze?,? Yaron Leitner explains what a market freeze is and some of the theories as to why these freezes occur.

Keywords: Financial markets;

Bibliographic Information

Provider: Federal Reserve Bank of Philadelphia

Part of Series: Business Review

Publication Date: 2011

Issue: Q2

Pages: 12-19