EconPapers    
Economics at your fingertips  
 

Theoretical notes on bubbles and the current crisis

Alberto Martin and Jaume Ventura ()
Additional contact information
Jaume Ventura: https://www.upf.edu/web/econ/faculty/-/asset_publisher/6aWmmXf28uXT/persona/id/3418977

Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra

Abstract: 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 countries. We also use the model to explore the role of fiscal policy.

Keywords: bubbles; dynamic inefficiency; financial accelerator; credit constraints; financial crisis; pyramid schemes. (search for similar items in EconPapers)
JEL-codes: E32 E44 G01 O40 (search for similar items in EconPapers)
Date: 2010-05, Revised 2011-02
New Economics Papers: this item is included in nep-cba
References: Add references at CitEc
Citations: View citations in EconPapers (55)

Downloads: (external link)
https://econ-papers.upf.edu/papers/1222.pdf Whole Paper (application/pdf)

Related works:
Working Paper: Theoretical Notes on Bubbles and the Current Crisis (2015) Downloads
Journal Article: Theoretical Notes on Bubbles and the Current Crisis (2011) Downloads
Working Paper: Theoretical notes on bubbles and the current crisis (2011) Downloads
Working Paper: Theoretical Notes on Bubbles and the Current Crisis (2010) Downloads
Working Paper: Theoretical Notes on Bubbles and the Current Crisis (2010) Downloads
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:upf:upfgen:1222

Access Statistics for this paper

More papers in Economics Working Papers from Department of Economics and Business, Universitat Pompeu Fabra
Bibliographic data for series maintained by ( this e-mail address is bad, please contact ).

 
Page updated 2025-03-22
Handle: RePEc:upf:upfgen:1222