This write-up of recent empirical research showed up in our RSS feed this morning. Thought you guys might like it; *** *The risk that asset price bubbles pose for financial stability is still not clear. Drawing on 140 years of data, this column argues that leverage is the critical determinant of crisis damage. When fuelled by credit booms, asset price bubbles are associated with high financial crisis risk; upon collapse, they coincide with weaker growth and slower recoveries. Highly leveraged housing bubbles are the worst case of all.*
- mberre
link: http://bit.ly/1EvkI2b