Bubbles and Total Factor Productivity

Jianjun Miao and Pengfei Wang

American Economic Review, 2012, vol. 102, issue 3, 82-87

Abstract: This paper presents an infinite-horizon model of production economies in which firms face idiosyncratic productivity shocks and are subject to endogenous credit constraints. Credit-driven stock price bubbles can arise which can relax credit constraints and reallocate capital more efficiently among firms. The collapse of bubbles causes a fall of total factor productivity.

Date: 2012
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Working Paper: Bubbles and Total Factor Productivity (2011)
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