Series: IMF Working Papers
Author(s): Javier Bianchi , Emine Boz , and Enrique Mendoza
Publisher: INTERNATIONAL MONETARY FUND
Publication Date: 01 July 2012
Keywords: Financial crises, financial innovation, macro-prudential regulation, Bayesian learning, collateral, bond, bonds, derivative
The interaction between credit frictions, financial innovation, and a switch from optimistic to pessimistic beliefs played a central role in the 2008 financial crisis. This paper develops a quantitative general equ...