Economic Growth with Bubbles

Alberto Martin and Jaume Ventura

No 15870, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We develop a stylized model of economic growth with bubbles. In this model, financial frictions lead to equilibrium dispersion in the rates of return to investment. During bubbly episodes, unproductive investors demand bubbles while productive investors supply them. Because of this, bubbly episodes channel resources towards productive investment raising the growth rates of capital and output. The model also illustrates that the existence of bubbly episodes requires some investment to be dynamically inefficient: otherwise, there would be no demand for bubbles. This dynamic inefficiency, however, might be generated by an expansionary episode itself.

JEL-codes: E32 E44 O40 (search for similar items in EconPapers)
Date: 2010-04
New Economics Papers: this item is included in nep-cba, nep-dge, nep-fdg and nep-mac
Note: EFG
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (23)

Published as Alberto Martin & Jaume Ventura, 2012. "Economic Growth with Bubbles," American Economic Review, American Economic Association, vol. 102(6), pages 3033-58, October.

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Related works:
Working Paper: Economic Growth with Bubbles (2015)
Journal Article: Economic Growth with Bubbles (2012)
Working Paper: Economic growth with bubbles (2011)
Working Paper: Economic Growth with Bubbles (2010)
Working Paper: Economic Growth with Bubbles (2010)
Working Paper: Economic Growth with Bubbles (2010)
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