Authors

Moritz Schularick

Alan M. Taylor

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2015-10 | August 1, 2015

What risks do asset price bubbles pose for the economy? This paper studies bubbles in housing and equity markets in 17 countries over the past 140 years. History shows that not all bubbles are alike. Some have enormous costs for the economy, while others blow over. We demonstrate that what makes some bubbles more dangerous than others is credit. When fueled by credit booms, asset price bubbles increase financial crisis risks; upon collapse they tend to be followed by deeper recessions and slower recoveries. Credit-financed housing price bubbles have emerged as a particularly dangerous phenomenon.

Article Citation

Taylor, Alan M., Moritz Schularick, and Oscar Jorda. 2015. “Leveraged Bubbles,” Federal Reserve Bank of San Francisco Working Paper 2015-10. Available at https://doi.org/10.24148/wp2015-10

About the Author
Òscar Jordà
Òscar Jordà is a senior policy advisor in the Economic Research Department of the Federal Reserve Bank of San Francisco. Learn more about Òscar Jordà