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https://dev.focus.bse.eu Research insights from the Barcelona School of Economics Tue, 23 Sep 2014 09:35:14 +0000 en-US hourly 1 https://wordpress.org/?v=5.8.13 https://dev.focus.bse.eu/wp-content/uploads/cropped-bse-focus-site-icon-32x32.png https://dev.focus.bse.eu 32 32 https://dev.focus.bse.eu/managing-credit-bubbles/ Tue, 29 Jul 2014 10:44:36 +0000 https://focus.barcelonagse.eu/?p=416 Alberto Martín and Jaume Ventura There is a widespread view among macroeconomists that fluctuations in collateral are an important driver of credit booms and busts. This column distinguishes between ‘fundamental’ collateral – backed by expectations of future profits – and ‘bubbly’ collateral – backed by expectations of future credit. Markets are generically unable to provide the optimal amount of bubbly collateral, which creates a natural role for stabilisation policies. A lender of last resort with the ability to tax and subsidise credit can design a ‘leaning against the wind’ policy that replicates the ‘optimal’ bubble allocation.]]>