Contagious Expectations and Malfunctions of Markets : Some Lessons from Japanese Financial Institution Failures of 1997 *
نویسندگان
چکیده
This paper discusses contagious effects of expectation in financial markets. We first review developments of Japanese financial markets towards the end of 1997 when a number of financial institutions collapsed. We then consider a simple model and study conditions under which contagious expectation triggers a financial crisis. Finally, based upon these, we derive some policy implications regarding the role of central bank lending.
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