August 06, 2001

Over the years we have collected a handful of examples of the economics of negative net worth. From these examples, we conducted a study to identify common characteristics among the various episodes. The empirical regularities shed some light into what causes the negative net worth situation, and what types of policies worsened and which polices helped the economic situation. However, to better understand the historical experiences it may be worthwhile to develop a simple framework. This way we may be able to develop a method to judge the severity of the negative net worth crisis and, hopefully, we may also be able to anticipate the recovery or transition to a "virtuous" cycle.

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