Asset Bubbles, Leverage and 'Lifeboats': Elements of the East Asian Crisis
Hali Edison (),
Pongsak Luangaram and
Marcus Miller ()
Economic Journal, 2000, vol. 110, issue 460, 309-34
Collapsing credit markets have been blamed for the depth and persistence of the Great Depression in the United States. Could similar mechanisms have played a role in ending the East Asian economic miracle--and in creating fragility in global financial markets? After a brief account of the nature of the East Asian crises of 1997/8, we use the framework of highly-leveraged, fully-collaterised firms due to Kiyotaki and Moore (1997) to explore the impact of a credit crunch. The paper emphasises the fragility of equilibrium and how rapidly boom can turn to bust.
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