The perils of credit booms

We present a dynamic general equilibrium model of production economies with adverse selection in the financial market to study the interaction between funding liquidity and market liquidity and its impact on business cycles. Entrepreneurs can take on short-term collateralized debt and trade long-term assets to finance investment. Funding liquidity can erode market liquidity. High funding liquidity discourages firms from selling their good long-term assets since these good assets have to subsidize lemons when there is information asymmetry. This can cause a liquidity dry-up in the market for long-term assets and even a market breakdown, resulting in a financial crisis. Multiple equilibria can coexist. Credit booms combined with changes in beliefs can cause equilibrium regime shifts, leading to an economic crisis or expansion.Published versio

Dark Energy: a Brief Review

The problem of dark energy is briefly reviewed in both theoretical and observational aspects. In the theoretical aspect, dark energy scenarios are classified into symmetry, anthropic principle, tuning mechanism, modified gravity, quantum cosmology, holographic principle, back-reaction and phenomenological types. In the observational aspect, we introduce cosmic probes, dark energy related projects, observational constraints on theoretical models and model independent reconstructions.Comment: 19 pages, invited review article to appear in the special issue of "Frontiers of Physics" dedicated to "High energy astrophysics", an shortened version of our previous article arXiv:1103.587