Citation

Discussion Paper Details

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Title: Leveraged Bubbles

Author(s): Òscar Jordà, Moritz Schularick and Alan M. Taylor

Publication Date: August 2015

Keyword(s): bank lending, boom, bust, crises, debt overhang and local projections

Programme Area(s): Economic History, Financial Economics and Monetary Economics and Fluctuations

Abstract: 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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Bibliographic Reference

Jordà, Ò, Schularick, M and Taylor, A. 2015. 'Leveraged Bubbles'. London, Centre for Economic Policy Research. https://cepr.org/active/publications/discussion_papers/dp.php?dpno=10781