Readings: Juy 19, 2015

posted in: ertsei, LIBRARY | 0

  >> Blog/Free Exchange: Sorry to Burst you Bubble (The Economist)

 

New Research suggest it is debt, not frothy asset prices, that should worry regulators.

Research by Oscar Jorda, Moritz Schularick and Alan Taylor from the National Bureau of Economics Research review bubbles in housing and equity markets over the last 140 years.  The severity of the following crisis and speed of recovery depend on debt levels.  Bubbles driven by exhuberance are less harmful than bubbles driven by relaxation of credit and rapidly rising debt.