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Title:A contribution to the theory of financial fragility and crisis PDF Logo
Authors:Bhaduri, Amit
Issue Date:2010
Series/Report no.:Working paper, Levy Economics Institute 593
Abstract: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.
Subjects:capital gains
consumer debt
debt-driven fluctuations
effective demand
financial fragility
liquidity preference
JEL:D84
E12
E21
E32
E41
E44
E51
G12
G18
G24
N22
Document Type:Working Paper
Appears in Collections:Working Papers, Levy Economics Institute of Bard College

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