Asset Bubbles, Endogenous Growth, and Financial Frictions

Tomohiro Hirano and Noriyuki Yanagawa

No 63, HIT-REFINED Working Paper Series from Institute of Economic Research, Hitotsubashi University

Abstract: This paper analyzes the existence and the effects of bubbles in an endogenous growth model with nancial frictions and heterogeneous investments. Bubbles are likely to emerge when the degree of pledgeability is in the middle range, implying that improving the nancial market might increase the potential for asset bubbles. Moreover, when the degree of pledgeability is relatively low, bubbles boost long-run growth; when it is relatively high, bubbles lower growth. Furthermore, we examine the effects of a bubble burst, and show that the effects depend on the degree of pledgeability, i.e., the quality of the nancial system. Finally, we conduct a full welfare analysis of asset bubbles.

Keywords: Asset Bubbles; Endogenous Growth; Pledgeability; bubble burst; welfare effects of bubbles (search for similar items in EconPapers)
Pages: 89 pages
Date: 2016-10
New Economics Papers: this item is included in nep-dge, nep-fdg and nep-ure
Note: Accepted at The Review of Economic Studies
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (37)

Downloads: (external link)
https://hermes-ir.lib.hit-u.ac.jp/hermes/ir/re/28169/wp063.pdf

Related works:
Journal Article: Asset Bubbles, Endogenous Growth, and Financial Frictions (2017)
Working Paper: Asset Bubbles, Endogenous Growth, and Financial Frictions (2016)
Working Paper: Asset Bubbles, Endogenous Growth, and Financial Frictions (2010)
Working Paper: Asset Bubbles, Endogenous Growth, and Financial Frictions (2010)
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