Leveraged bubbles

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 som...

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Bibliographic Details
Published in:Journal of monetary economics 2015-12, Vol.76, p.S1-S20
Main Authors: Jordà, Òscar, Schularick, Moritz, Taylor, Alan M.
Format: Article
Language:English
Subjects:
Bank lending
Boom
Bust
Crises
Debt overhang
Economic crisis
Economic impact
Housing prices
Local projections
Manycountries
Risk assessment
Stock prices
Studies
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Summary: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.
ISSN:0304-3932
1873-1295
DOI:10.1016/j.jmoneco.2015.08.005