Credit Cycles (Journal of Political Economy, Vol. 105, No. 2, April 1997)
by Nobuhiro Kiyotaki and John Moore
In a financial crisis, how can the sudden loss of liquidity occur? The Kiyotaki and Moore paper provides a possible scenario. Their model shows how what began as a problem in the real estate market – in fact, just the subprime part of the real estate market – can grow into something that envelops the entire financial sector.
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Economic Theory and the Financial Crisis: A Reading List
Eric Maskin, Economist
