Bubbly Liquidity

Emmanuel Farhi and Jean Tirole

No 09-101, TSE Working Papers from Toulouse School of Economics (TSE)

Abstract: This paper analyzes the possibility and the consequences of asset price overvaluation in a dynamic economy where financially constrained firms demand and supply liquidity. Bubbles are more likely to emerge, the scarcer the supply of outside liquidity and the more limited the pledgeability of corporate income; they crowd investment in (out) when liquidity is abundant (scarce). We analyze the economic implications of firm heterogeneity, endogenous corporate governance, and stochastic bubbles. Finally we draw some implications for the way public policy could react to bubbles.

JEL-codes: E2 E44 (search for similar items in EconPapers)
Date: 2009-10, Revised 2011-02
New Economics Papers: this item is included in nep-bec and nep-mac
References: Add references at CitEc
Citations: View citations in EconPapers (25)

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
Journal Article: Bubbly Liquidity (2012)
Working Paper: Bubbly Liquidity (2011)
Working Paper: Bubbly Liquidity (2011)
Working Paper: Bubbly Liquidity (2011)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:tse:wpaper:21965

Access Statistics for this paper

More papers in TSE Working Papers from Toulouse School of Economics (TSE) Contact information at EDIRC.
Bibliographic data for series maintained by ().