Financial Innovation, the Discovery of Risk, and the U.S. Credit Crisis

WP/10/164

Financial Innovation, the Discovery of Risk, and the U.S. Credit Crisis
Uncertainty about the riskiness of new financial products was an important factor behind the U.S. credit crisis. We show that a boom-bust cycle in debt, asset prices and consumption characterizes the equilibrium dynamics of a model with a collateral constraint in which agents learn "by observation" the true riskiness of a new financial... READ MORE...

Publication date: July 2010
ISBN 9781455201754
$18.00

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Publication date: July 2010

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Publication date: July 2010

English