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We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to … equilibriumdispersion in the rates of return to investment. During bubbly episodes, unproductive investors demand bubbles while productive … dynamically inefficient: otherwise, there would be no demand for bubbles. This dynamic ineficiency, however, might be generated by …
Persistent link: https://www.econbiz.de/10010547394
We explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in financial markets. We embed this view in a standard model of the financial accelerator and explore its empirical and policy implications. In particular, we show how the...
Persistent link: https://www.econbiz.de/10010851442
backed only by the expectation of their future value. We consider two types of unbacked assets: bubbles, which are created by … the private sector, and money, which is created by the central bank. Bubbles and money share many features, but they also … differ in two crucial respects. First, while the rents from the creation of bubbles accrue to entrepreneurs and foster …
Persistent link: https://www.econbiz.de/10012902889
This paper develops a general equilibrium model to examine the quantitative effects of speculative bubbles on capital … late 1990s. The welfare cost of speculative bubbles depends crucially on parameter values. Bubbles can improve welfare if …, the welfare cost of bubbles is large, typically exceeding one percent of annual consumption …
Persistent link: https://www.econbiz.de/10013087553
How do housing bubbles affect other economic sectors? We show that in the presence of collateral constraints, a bubble … initially raises housing credit demand and crowds out credit to non-housing firms. If the bubble lasts, however, housing credit … repayments raise banks' net worth and expand credit supply, so that crowding-out eventually gives way to crowding-in. This is …
Persistent link: https://www.econbiz.de/10011975621
future house prices which, in turn, led to a collapse in lending standards. A common feature of all bubbles which complicates … economic fallout from the recent financial crisis, central bank views on the use of monetary policy to lean against bubbles …
Persistent link: https://www.econbiz.de/10013007703
We explore a view of the crisis as a shock to investor sentiment that led to the collapse of a bubble or pyramid scheme in financial markets. We embed this view in a standard model of the financial accelerator and explore its empirical and policy implications. In particular, we show how the...
Persistent link: https://www.econbiz.de/10013124891
fiscal policy. - Bubbles ; financial accelerator ; credit constraints ; financial crisis ; pyramid schemes …
Persistent link: https://www.econbiz.de/10009160016
economic model that captures the links between asset prices, credit expansion, and real economic activity. Standard DSGE models … used to dampen the resulting excess volatility, including a direct response to house price growth or credit growth in the … to house price growth or credit growth can stabilize some economic variables, it can significantly magnify the volatility …
Persistent link: https://www.econbiz.de/10013007544
We use a simple quantitative asset pricing model to "reverse-engineer" the sequences of stochastic shocks to housing demand and lending standards that are needed to exactly replicate the boom-bust patterns in U.S. household real estate value and mortgage debt over the period 1995 to 2012....
Persistent link: https://www.econbiz.de/10012937131