Theoretical Notes on Bubbles and the Current Crisis

Alberto Martin and Jaume Ventura

No 16399, NBER Working Papers from National Bureau of Economic Research, Inc

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 sectors and countries. We also use the model to explore the role of fiscal policy

JEL-codes: E32 E44 G01 O40 (search for similar items in EconPapers)
Date: 2010-09
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (29)

Published as Alberto Martin & Jaume Ventura, 2011. "Theoretical Notes on Bubbles and the Current Crisis," IMF Economic Review, Palgrave Macmillan, vol. 59(1), pages 6-40, April.

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Related works:
Working Paper: Theoretical Notes on Bubbles and the Current Crisis (2015)
Journal Article: Theoretical Notes on Bubbles and the Current Crisis (2011)
Working Paper: Theoretical notes on bubbles and the current crisis (2011)
Working Paper: Theoretical notes on bubbles and the current crisis (2011)
Working Paper: Theoretical Notes on Bubbles and the Current Crisis (2010)
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