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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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We analyze the determinants of real estate and credit bubbles using a unique borrower-lender matched dataset on … than in the bust. Moreover, despite some adjustment in lending conditions in the good times depending on borrower risk, the … results suggest too soft lending standards and excessive risk-taking in the boom. For example, mortgage spreads for non …
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