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The authors construct a monetary model of financial crises that can explain two characteristic features of the global financial crisis in 2008/2009, namely, the widespread freeze of asset transactions and a sharp contraction in aggregate output. They assume that the assets, such as real estate, work as media of exchange on a de facto basis in the goods market. In the financial crisis, excessively indebted investors hoard the assets hoping for a miraculous rise in their value (risk-shifting behavior), although the asset hoarding hinders the assets from working as media of exchange in the goods trading. Accordingly, the asset hoarding causes the disappearance of a significant portion of broad "Money," which directly results in a contraction in aggregate production.
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