Bubbles and Self-Fulfilling Crises
نویسندگان
چکیده
منابع مشابه
Self-fulfilling Crises and Country Solidarity∗
Sovereign risk premia reflect investors’ beliefs for the equilibrium and off -equilibrium actions of international agents. This paper investigates the international dimension of self-fulfilling sovereign debt crises and characterizes self-interested bailouts (solidarity) and contagion. A credible bailout guarantee by a partner country or international agency can lower a debtor country’s borrowi...
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This document contains additional derivations that have been omitted in the main appendix, but which a reader might be interested in. In Section 1, I derive the expression for the change in the default threshold A∗ when the government implements the policy change with probability p ∈ (0, 1). In Section 2, I provide a detailed proof of Proposition B.1 reported in Section B.1 of the Appendix. In ...
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We develop a model of currency crises, in which traders are heterogeneously informed, and interest rates are endogenously determined in a noisy rational expectations equilibrium. In our model, multiple equilibria result from distinct roles an interest rate plays in determining domestic asset market allocations and the devaluation outcome. Except for special cases, this finding is not affected b...
متن کاملBubbles and Crises
In recent ®nancial crises a bubble, in which asset prices rise, is followed by a collapse and widespread default. Bubbles are caused by agency relationships in the banking sector. Investors use money borrowed from banks to invest in risky assets, which are relatively attractive because investors can avoid losses in low payoff states by defaulting on the loan. This risk shifting leads investors ...
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ژورنال
عنوان ژورنال: The B.E. Journal of Macroeconomics
سال: 2011
ISSN: 1935-1690
DOI: 10.2202/1935-1690.2064