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The Great Recession has been characterised by the two stylized facts: the buildup of leverage in the household sector in the period preceding the recession and a protracted economic recovery that followed. We attempt to explain these two facts as an information friction, whereby agents are...
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Drawing broadly on the literature on the political economy of the financial crisis, the paper looks at deregulation as … opportunistic profit (rent) seeking was more the cause rather than the effect of moral hazard and regulation failure. Deregulation … deregulation promised in turn incentivized financial firms to invest in tilting the political process to shape government policy …
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