are too low. In this environment, changes in investor sentiment or market expectations can give rise to credit bubbles …We study a dynamic economy where credit is limited by insufficient collateral and, as a result, investment and output …, that is, expansions in credit that are backed not by expectations of future profits (i.e. fundamental collateral), but …

We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to equilibrium … dispersion in the rates of return to investment. During bubbly episodes, relatively inefficient investors demand bubbles while … investment to be dynamically inefficient: otherwise, there would be no demand for bubbles. This dynamic inefficiency, however …

: rational bubbles and financial frictions. We explain why each of these building blocks is crucial to understand recent events …

the corporate bond market (the "credit spread puzzle"). This paper introduces a parsimonious real business cycle model … disaster. This simple feature generates large, volatile and countercyclical credit spreads as well as novel business cycle …

environment is conducive to countries experiencing credit bubbles that have large macroeconomic effects at home and are quickly … and domestic effects of these credit bubbles. This paper extends that framework to two-country setting and studies the … channels through which credit bubbles are transmitted across countries. We find that there are two main channels that work …