MARC Record from Library of Congress

LEADER: 02234cam a22002897a 4500
001 2010655909
003 DLC
005 20100602091359.0
007 cr |||||||||||
008 100601s2010 mau sb 000 0 eng
010 $a 2010655909
040 $aDLC$cDLC
050 00 $aHB1
100 1 $aBoz, Emine.
245 10 $aFinancial innovation, the discovery of risk, and the U.S. credit crisis$h[electronic resource] /$cEmine Boz, Enrique G. Mendoza.
260 $aCambridge, MA :$bNational Bureau of Economic Research,$cc2010.
490 1 $aNBER working paper series ;$vworking paper 16020
538 $aSystem requirements: Adobe Acrobat Reader.
538 $aMode of access: World Wide Web.
500 $aTitle from PDF file as viewed on 6/1/2010.
530 $aAlso available in print.
504 $aIncludes bibliographical references.
520 3 $a"Uncertainty about the riskiness of a new financial environment was an important factor behind the U.S. credit crisis. We show that a boom-bust cycle in debt, asset prices and consumption characterizes the equilibrium dynamics of a model with a collateral constraint in which agents learn "by observation" the true riskiness of the new environment. Early realizations of states with high ability to leverage assets into debt turn agents overly optimistic about the probability of persistence of a high-leverage regime. Conversely, the first realization of the low-leverage state turns agents unduly pessimistic about future credit prospects. These effects interact with the Fisherian deflation mechanism, resulting in changes in debt, leverage, and asset prices larger than predicted under either rational expectations without learning or with learning but without Fisherian deflation. The model can account for 69 percent of the rise in net household debt and 53 percent of the rise in residential land prices between 1997 and 2006, and it predicts a sharp collapse in 2007"--National Bureau of Economic Research web site.
700 1 $aMendoza, Enrique G.,$d1963-
710 2 $aNational Bureau of Economic Research.
830 0 $aWorking paper series (National Bureau of Economic Research : Online) ;$vworking paper no. 16020.
856 40 $uhttp://www.nber.org/papers/w16020