Shock horror: surprises to blame for crises
There are many similarities across financial crises, but the core of the problem is often a significant surprise, which suddenly changes, at least temporarily, the perceived rules of the game, research argues.
The research, conducted by Massachusetts Institute of Technology economists Ricardo Caballero and Pablo Kurlat, finds that the original shock may come from partially anticipated factors, such as a burst of a real estate bubble, but says the real crisis arises when the filtering of such
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