output comes from an unusual regime. -- Bubbles ; fiscal theory of the price level ; collateral constraints ; neutrality …This paper proposes and tests a theory of credit-driven asset bubbles which are neutral in their real effects. When a … lender such as a government, central bank, or banking sector is willing to lend infinitely against collateral, explosive …

to smooth consumption over time and because they provide collateral and liquidity services. We characterize a recursive … and contemporaneous costs due to lost collateral and liquidity are essential to generate these empirically plausible …