Economic growth with bubbles

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American Economic Review, 102 (6), 3033-3058, October 2012
To cite or link this document: Martin, Alberto Ventura, Jaume
dc.contributor.other Universitat Pompeu Fabra. Departament d'Economia i Empresa 2003-11-01
dc.identifier.citation American Economic Review, 102 (6), 3033-3058, October 2012
dc.description.abstract We develop a stylized model of economic growth with bubbles. In this model, changes in investor sentiment lead to the appearance and collapse of macroeconomic bubbles or pyramid schemes. We show how these bubbles mitigate the effects of financial frictions. During bubbly episodes, unproductive investors demand bubbles while productive investors supply them. These transfers of resources improve the efficiency at which the economy operates, expanding consumption, the capital stock and output. When bubbly episodes end, these transfers stop and consumption, the capital stock and output contract. We characterize the stochastic equilibria of the model and argue that they provide a natural way of introducing bubble shocks into business cycle models.
dc.language.iso eng
dc.relation.ispartofseries Economics and Business Working Papers Series; 848
dc.rights L'accés als continguts d'aquest document queda condicionat a l'acceptació de les condicions d'ús establertes per la següent llicència Creative Commons
dc.title Economic growth with bubbles
dc.type info:eu-repo/semantics/workingPaper 2016-06-04T02:50:50Z
dc.subject.keyword Macroeconomics and International Economics
dc.subject.keyword bubbles
dc.subject.keyword dynamic inefficiency
dc.subject.keyword economic growth
dc.subject.keyword financial frictions
dc.subject.keyword pyramid schemes
dc.rights.accessRights info:eu-repo/semantics/openAccess

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