NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Leveraged Bubbles

Òscar Jordà, Moritz Schularick, Alan M. Taylor

NBER Working Paper No. 21486
Issued in August 2015
NBER Program(s):Asset Pricing, Development of the American Economy, Economic Fluctuations and Growth, International Finance and Macroeconomics, Monetary Economics

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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Document Object Identifier (DOI): 10.3386/w21486

Published: Òscar Jordà & Moritz Schularick & Alan M. Taylor, 2015. "Leveraged bubbles," Journal of Monetary Economics, vol 76(), pages S1-S20. citation courtesy of

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