Economic Growth with Bubbles

Jaume Ventura and Martín, Alberto
Authors registered in the RePEc Author Service: Alberto Martin

No 7770, CEPR Discussion Papers from C.E.P.R. Discussion Papers

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, relatively inefficient investors demand bubbles while relatively efficient investors supply them. Because of this, bubbly episodes channel resources towards efficient 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.

Keywords: Asset bubbles; Dynamic inefficiency; Economic growth; Financial frictions; Pyramid schemes (search for similar items in EconPapers)
JEL-codes: E32 E44 O40 (search for similar items in EconPapers)
Date: 2010-04
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (16)

Downloads: (external link)
https://cepr.org/publications/DP7770 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

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)
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:cpr:ceprdp:7770

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP7770

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().