Upcoming Webinars
Frost and Fire: A Tale of Two Crises
Vladimir Asriyan, Priit Jeenas, and Alberto Martin
October 2, 2025
Seminar: 12:00 pm - 1:00 pm ET
Virtual Coffee Break: 1:00 pm - 1:30 pm ET
Presented by Vladimir
Abstract: Financial crises are characterized by depressed asset prices, tight financial constraints, and misallocation of resources. Standard policy responses—such as asset purchases and low interest rates—are generally intended to alleviate these symptoms. This paper distinguishes between two types of crises that appear similar but differ fundamentally in mechanism and policy response: fire-sale crises, where productive firms are compelled to sell assets; and demand-freeze crises, where productive firms are unable to purchase assets. While both lead to similar observable outcomes at the aggregate level, they have contrasting general equilibrium effects and call for different policy interventions. Notably, conventional policies can be counterproductive in demand-freeze crises, as they may exacerbate financial constraints and further distort resource allocation. Empirical evidence on the pattern of capital reallocation among US firms suggests that demand-freeze crises are, in fact, more common.