Stock-market crashes tend to follow run-ups in prices. These episodes look like bubbles that gradually inflate and then suddenly burst. We show that such bubbles can form in a Zeira-Rob type of model in which demand size is uncertain. Two conditions are sufficient for this to happen: A declining...

Stock-market crashes tend to follow run-ups in prices. These episodes look like bubbles that gradually inflate and then suddenly burst. We show that such bubbles can form in a Zeira-Rob type of model in which demand size is uncertain. Two conditions are sufficient for this to happen: A declining...

"We identify a new set of stylized facts on the 2008-2009 trade collapse that we hope can be used to shed light on the importance of demand and supply-side factors in explaining the fall in trade. In particular, we decompose the fall in international trade into product entry and exit, price...