Bubbles, Banks, and Financial Stability
Kosuke Aoki and
Kalin Nikolov
No 11-E-24, IMES Discussion Paper Series from Institute for Monetary and Economic Studies, Bank of Japan
Abstract:
This paper asks two main questions: (1) What makes some asset price bubbles more costly for the real economy than others? and (2)When do costly bubbles occur? We construct a model of rational bubbles under credit frictions and show that when bubbles held by banks burst this is followed by a costly financial crisis. In contrast, bubbles held by ordinary savers have relatively muted effects. Banks tend to invest in bubbles when financial liberalisation decreases their profitability.
Keywords: Rational bubbles; Financial Frictions; Financial Stability (search for similar items in EconPapers)
JEL-codes: E32 E44 (search for similar items in EconPapers)
Date: 2011-09
New Economics Papers: this item is included in nep-ban, nep-cba and nep-mac
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Citations: View citations in EconPapers (31)
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http://www.imes.boj.or.jp/research/papers/english/11-E-24.pdf (application/pdf)
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 (2012) 
Working Paper: Bubbles, Banks, and Financial Stability (2011) 
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Persistent link: https://EconPapers.repec.org/RePEc:ime:imedps:11-e-24
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