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...

Why did the country that borrowed the most industrialize first? Earlier research has viewed the explosion of debt in 18th century Britain as either detrimental, or as neutral for economic growth. In this paper, we argue instead that Britain's borrowing boom was beneficial. The massive issuance...

We develop a stylized model of economic growth with bubbles. In this model, financial frictions leadto equilibrium dispersion in the rates of return to investment. During bubbly episodes, unproductiveinvestors demand bubbles while productive investors supply them. Because of this, bubbly...

This paper introduces various sources of consumer heterogeneity in one-sector representative consumer (RC) growth models and develops tools to study the evolution of the distribution of consumptions, assets and incomes.[...]