Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/203930 
Authors: 
Year of Publication: 
2010
Series/Report no.: 
wiiw Working Paper No. 65
Publisher: 
The Vienna Institute for International Economic Studies (wiiw), Vienna
Abstract: 
Three interrelated aspects typical of most financial crisis of domestic origin are brought together in a model in this paper. The first aspect is debt financed consumption boom supported by rising asset prices which ultimately leads to credit crunch and debt deflation as lenders lose confidence in borrowers. This is related to the second aspect tracing gradual evolution towards Ponzi finance. This is accompanied by fragility of the financial sector itself and its insolvency as an inevitable outcome of unregulated economic expansion. The paper concludes with comments on how these three aspects interact in the real world of possible extensions.
Subjects: 
capital gains
consumers' 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

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