A Contribution to the Theory of Financial Fragility and Crisis
Three interrelated aspects typical of most financial crisis of domestic origin are brought together in a model in this paper. The first aspect is debt financed consumption boom supported by rising asset prices which ultimately leads to credit crunch and debt deflation as lenders lose confidence in borrowers. This is related to the second aspect tracing gradual evolution towards Ponzi finance. This is accompanied by fragility of the financial sector itself and its insolvency as an inevitable outcome of unregulated economic expansion. The paper concludes with comments on how these three aspects interact in the real world of possible extensions.
|Length:||18 pages including 2 Figures|
|Date of creation:||May 2010|
|Publication status:||Published as wiiw Working Paper|
|Contact details of provider:|| Postal: Rahlgasse 3, A-1060 Vienna|
Phone: (+43-1) 533 66 10
Fax: (+43-1) 533 66 10-50
Web page: http://www.wiiw.ac.at
More information through EDIRC
|Order Information:||Web: http://wiiw.ac.at|
When requesting a correction, please mention this item's handle: RePEc:wii:wpaper:65. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Customer service)
If references are entirely missing, you can add them using this form.