Liquidity and asset market cycles

Jong Shin

Economics Letters, 2023, vol. 226, issue C

Abstract: We develop a theory of boom-bust cycle of rational bubbles capable of replicating some of the stylized patterns of the bubbly episodes which we document. Instead of relying on random investor sentiments to explain the cycle, we use the interplay of liquidity supply and economic fundamentals. Related policy implications are discussed.

Keywords: Rational bubbles; Regime switch; Business cycle (search for similar items in EconPapers)
JEL-codes: E30 E44 E50 E60 G18 (search for similar items in EconPapers)
Date: 2023
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:226:y:2023:i:c:s0165176523001441

DOI: 10.1016/j.econlet.2023.111119

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