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Leveraged Bubbles

Listed author(s):
  • Òscar Jordà
  • Moritz Schularick
  • Alan M. Taylor

What risks do asset price bubbles pose for the economy? This paper studies bubbles in housing and equity markets in 17 countries over the past 140 years. History shows that not all bubbles are alike. Some have enormous costs for the economy, while others blow over. We demonstrate that what makes some bubbles more dangerous than others is credit. When fueled by credit booms, asset price bubbles increase financial crisis risks; upon collapse they tend to be followed by deeper recessions and slower recoveries. Credit-financed housing price bubbles have emerged as a particularly dangerous phenomenon.

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Paper provided by National Bureau of Economic Research, Inc in its series NBER Working Papers with number 21486.

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Date of creation: Aug 2015
Publication status: published as Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2015. "Leveraged bubbles," Journal of Monetary Economics, vol 76(), pages S1-S20.
Handle: RePEc:nbr:nberwo:21486
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