bubbles appear in the last stage of an economic boom, when expectations are irrationally optimistic.
Kindleberger and Aliber, (2005):“an upward price movement over an extended period of 15 to 40 months that then implodes.” and “in the 20th Century most of the manias and bubbles have centered on real estate and stocks.”
magnitude of change of the asset price exceeds 40%
The bursting of
BurstBubble and Accounting Myths
Once the Justice Department refused to approve the final proposed merger with Sprint, WorldCom came unraveled. It resulted mainly from the burst in the dot-com bubble and the resulting decline in the telecommunications industry.
There was a 52.8% decline in employment in the telecom industry from 2000 to 2002. WorldCom could no longer sustain what had been phe
bubble burst. Yen carry assets were paid off again.
3) Japan continued to retain the zero interest rate and the U.S. rose the interest rate so that Yen carry trade began. Due to the subprime mortgage crisis, Yen carry assets were paid off.
The IMF Staff’s paper analyzes the relation between yen carry trade and subprime as below. “This figure is the scatter chart of monthly change in n
2) Managing external debt using sustainability indicators
External debt management involves balancing resource mobilization and deployment as well as orderly repayment of future obligations. For sustainable debt management, policy makers need to project accurate debt dynamics that are sensitive to the way the current account deficits are being financed. If borrowed resources are not used produ
2. the securitization of financial assets
&
the interconnectedness between financial institutions both within and across countries
*Huge deficits of the financial institution
*The credit crunch
*Increasing voltility of stock price, interest rate, exchange rate