Theoretical notes on bubbles and the current crisis

Arbeitspapier

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.

Object Details

• Language: Englisch

References and Relationships

• Bibliographic citation: Series: ECB Working Paper ; No. 1348

Classification and Topics

• Classification: Wirtschaft ; Business Fluctuations; Cycles ; Financial Markets and the Macroeconomy ; Financial Crises ; Economic Growth and Aggregate Productivity: General
• Subject: bubbles ; credit constraints ; financial accelerator ; financial crisis ; pyramid schemes ; Finanzpolitik ; Finanzmarkt ; Finanzkrise ; Schock ; Spekulationsblase ; Bruttoinlandsprodukt ; Industrieländer

Contributors, Places and Time

• Event: Geistige Schöpfung
• (who): Martin, Alberto ; Ventura, Jaume
• Event: Veröffentlichung
• (who): European Central Bank (ECB)
• (where): Frankfurt a. M.
• (when): 2011

Further information

• Handle: http://hdl.handle.net/10419/153782
• Last update: 10.03.2025, 11:44 AM CET