Asset Price Bubbles and Systemic Risk

83 Pages Posted: 30 Apr 2019

See all articles by Markus K. Brunnermeier

Markus K. Brunnermeier

Princeton University - Department of Economics

Simon C. Rother

University of Bonn

Isabel Schnabel

University of Bonn - Institute for Financial Economics and Statistics; Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods

Multiple version iconThere are 2 versions of this paper

Date Written: April 2019

Abstract

We analyze the relationship between asset price bubbles and systemic risk, using bank-level data covering almost thirty years. Systemic risk of banks rises already during a bubble’s build-up phase, and even more so during its bust. The increase differs strongly across banks and bubble episodes. It depends on bank characteristics (especially bank size) and bubble characteristics, and it can become very large: In a median real estate bust, systemic risk increases by almost 70 percent of the median for banks with unfavorable characteristics. These results emphasize the importance of bank-level factors for the build-up of financial fragility during bubble episodes.

Institutional subscribers to the NBER working paper series, and residents of developing countries may download this paper without additional charge at www.nber.org.

Suggested Citation

Brunnermeier, Markus Konrad and Rother, Simon and Schnabel, Isabel, Asset Price Bubbles and Systemic Risk (April 2019). NBER Working Paper No. w25775. Available at SSRN: https://ssrn.com/abstract=3379455

Markus Konrad Brunnermeier (Contact Author)

Princeton University - Department of Economics ( email )

Bendheim Center for Finance
Princeton, NJ
United States
609-258-4050 (Phone)
609-258-0771 (Fax)

HOME PAGE: http://www.princeton.edu/¡­markus

Simon Rother

University of Bonn ( email )

Regina-Pacis-Weg 3
Postfach 2220
Bonn, D-53012
Germany

Isabel Schnabel

University of Bonn - Institute for Financial Economics and Statistics ( email )

Adenauerallee 24-42
Bonn, 53113
Germany

HOME PAGE: http://www.finance.uni-bonn.de/schnabel

Max Planck Society for the Advancement of the Sciences - Max Planck Institute for Research on Collective Goods ( email )

Kurt-Schumacher-Str. 10
D-53113 Bonn, 53113
Germany
+49-228-9141665 (Phone)
+49-228-9141621 (Fax)

HOME PAGE: http://www.coll.mpg.de/team/page/isabel_schnabel

Register to save articles to
your library

Register

Paper statistics

Downloads
18
Abstract Views
167
PlumX Metrics