Theoretical notes on bubbles and the current crisis

Description

"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 model can account for: (i) a gradual and protracted expansionary phase followed by a sudden and sharp recession; (ii) the connection (or lack of connection!) between financial and real economic activity and; (iii) a fast and strong transmission of shocks across sectors and countries. We also use the model to explore the role of fiscal policy"--National Bureau of Economic Research web site.

Subjects

Series Statement

• NBER working paper series -- working paper 16399
• Working paper series (National Bureau of Economic Research : Online) -- working paper no. 16399.

Links

• External source

Other Editions

• Theoretical notes on bubbles and the current crisisElectronic resourceNational Bureau of Economic Research2010-01-01
• Theoretical notes on bubbles and the current crisisElectronic resourceNational Bureau of Economic Research2010-01-01