Bubbles and crowding-in of capital via a savings glut

Marten Hillebrand, Tomoo Kikuchi and Masaya Sakuragawa

No 48, Working Paper Series in Economics from Karlsruhe Institute of Technology (KIT), Department of Economics and Management

Abstract: This paper uncovers a novel mechanism by which bubbles crowd in capital investment. If capital is initially depressed by a binding credit constraint, injecting a bubble triggers a savings glut. Higher returns in a new bubbly equilibrium attract additional investors who expand investment at the extensive margin. We demonstrate that crowding-in through this channel is a robust phenomenon that occurs along the entire time path after bubbles are injected.

Keywords: rational bubbles; savings glut; crowding-in; financial frictions (search for similar items in EconPapers)
JEL-codes: E21 E32 E44 (search for similar items in EconPapers)
Date: 2013
New Economics Papers: this item is included in nep-mac and nep-mic
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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https://www.econstor.eu/bitstream/10419/88424/1/771923171.pdf (application/pdf)

Related works:
Journal Article: BUBBLES AND CROWDING-IN OF CAPITAL VIA A SAVINGS GLUT (2018)
Working Paper: Bubbles and Crowding-in of Capital via a Savings Glut (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:kitwps:48

DOI: 10.5445/IR/1000037162

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