ENDOGENOUS BUSINESS CYCLES WITH BUBBLES

Shintaro Asaoka ()
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Shintaro Asaoka: Institute of Economic Research, Kyoto University

No 985, KIER Working Papers from Kyoto University, Institute of Economic Research

Abstract: This study examines the existence of bubbles in an economy with a low growth rate. By using an overlapping-generations model with Matsuyama's (1999) production sector, it is shown a bubble exists in an economy with a low growth rate. If consumers can borrow assets when they are young, then there is a unique cycle with a bubble moving back and forth between two phases. In one phase, the output growth rate is low and innovation occurs. In the other phase, the output growth rate is high and there is no innovation. Therefore, a bubble also exists in an economy with a high growth rate. On the contrary, cycles cannot emerge if consumers save assets when they are young.

Keywords: bubbles; endogenous growth model (search for similar items in EconPapers)
JEL-codes: D91 E32 O41 (search for similar items in EconPapers)
Pages: 16pages
Date: 2018-01
New Economics Papers: this item is included in nep-dge, nep-gro and nep-mac
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