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I develop a framework of the buildup and outbreak of financial crises in an asymmetric information setting. In equilibrium, two distinct economic states arise endogenously: "normal times", periods of modest investment, and "booms", periods of expansionary investment. Normal times occur when the...
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inflation, especially in the real estate market. While asset price bubbles were present in most Asian countries during the 1990s …
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bubbles. For this we posit an overlapping generation model where productivity and credit supply are subject to random shocks …. We find that when real interest rates are lower than the rate of growth, credit financed bubbles may be welfare improving …
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