Mendoza, Enrique G.; Bianchi, Javier; Boz, Emine - National Bureau of Economic Research (NBER) - 2012
The interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs … innovation enhances the ability of agents to collateralize assets into debt, but the riskiness of this new regime can only be … tightness of credit constraints and the pace at which optimism surges in the early stages of financial innovation. The policy is …