Publications

Working Paper No. 593 | May 2010

A Contribution to the Theory of Financial Fragility and Crisis

The paper examines three aspects of a financial crisis of domestic origin. The first section studies the evolution of a debt-financed consumption boom supported by rising asset prices, leading to a credit crunch and fluctuations in the real economy, and, ultimately, to debt deflation. The next section extends the analysis to trace gradual evolution toward Ponzi finance and its consequences. The final section explains the link between the financial and the real sector of the economy, pointing to an inherent liquidity problem. The paper concludes with comments on the interactions between the three aspects.

Related Publications


Publication Highlight

Working Paper No. 908
Twenty Years after the Fall of the Berlin Wall
Rethinking the Role of Money and Markets in the Global Economy
Author(s): W. Lee Hoskins, Walker F. Todd
June 2018

Quick Search

Search in: