Bubbles, banks and financial stability

Kalin Nikolov and Kosuke Aoki

No 1495, Working Paper Series from European Central Bank

Abstract: We build a model of rational bubbles in a limited commitment economy and show that the impact of the bubble on the real economy crucially depends on who holds the bubble. When banks are the bubble-holders, this ampli?es the output boom while the bubble survives but also deepens the recession when the bubble bursts. In contrast, the real impact of bubbles held by ordinary savers is more muted. JEL Classification: E

Keywords: Financial; Stability (search for similar items in EconPapers)
Date: 2012-11
New Economics Papers: this item is included in nep-ban and nep-cba
Note: 288883
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (10)

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Related works:
Journal Article: Bubbles, banks and financial stability (2015)
Journal Article: Bubbles, banks and financial stability (2012)
Working Paper: Bubbles, banks and financial stability (2012)
Working Paper: Bubbles, Banks, and Financial Stability (2011)
Working Paper: Bubbles, Banks, and Financial Stability (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:ecb:ecbwps:20121495

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