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The global financial crisis (2008-2009) represents a notable example of a generally unpredicted crisis in economic history. Nevertheless, it presented features comparable to almost any previous (monetarily related) crisis episode. For instance, it was characterized by a "vicious cycle" made by...
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result has been a succession of bubbles and crashes, including the worldwide stock market bubble and great crash of 19 … market bubbles and its ensuing “lost decades”, the emerging markets bubbles and crashes in 1994 and 1997, the LTCM crisis of … 1998, the dotcom bubble bursting in 2000, the recent house price bubbles, the financialization bubble via special …
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This paper studies the impact of the state-dependent risk of a government default on the correlation of the scal balance and current account. We use a small open economy model where nonlinear risk premia arise endogenously when the government operates close to its scal limit, i.e. the maximum...
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