Leveraged borrowing and boom-bust cycles

No 2010-027, Working Papers from Federal Reserve Bank of St. Louis

Abstract: Investment booms and asset \"bubbles\" are often the consequence of heavily leveraged borrowing and speculations of persistent growth in asset demand. We show theoretically that dynamic interactions between leveraged borrowing and persistent asset demand can generate a multiplier-accelerator mechanism that transforms a one-time technological innovation into large and long-lasting boom-bust cycles. The predictions are consistent with the basic features of investment booms and the consequent asset-market crashes led by excessive credit expansion.

Keywords: Asset pricing; Credit (search for similar items in EconPapers)
Date: 2010
New Economics Papers: this item is included in nep-ban, nep-bec, nep-dge and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (6)

Downloads: (external link)
https://s3.amazonaws.com/real.stlouisfed.org/wp/2010/2010-027.pdf Full text (application/pdf)

Related works:
Journal Article: Leveraged Borrowing and Boom-Bust Cycles (2013)
Working Paper: Leveraged Borrowing and Boom-Bust Cycles (2013)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:fip:fedlwp:2010-027

Ordering information: This working paper can be ordered from

DOI: 10.20955/wp.2010.027

Access Statistics for this paper

More papers in Working Papers from Federal Reserve Bank of St. Louis Contact information at EDIRC.
Bibliographic data for series maintained by Scott St. Louis ().