Bubbles and unemployment in an endogenous growth model

Ken-ichi Hashimoto and Ryonghun Im

Oxford Economic Papers, 2016, vol. 68, issue 4, 1084-1106

Abstract: We construct a continuous-time overlapping-generations model with labour market frictions to examine the relationships among unemployment, asset bubbles, and economic growth. We show that the existence of asset bubbles is contingent upon the unemployment rate: a bubble (non-bubble) regime arises in equilibrium when unemployment is relative low (high). Our framework focuses on the boom and bust of asset bubbles caused by changes in fundamental variables, not a stochastic probability. Then, as labour market frictions generate a negative relationship between the unemployment rate and economic growth, we find that the bubble regime exhibits a higher growth rate than the non-bubble regime. Furthermore, we show that policy or parameter changes that have a positive influence on the labour market shift the economy from a non-bubble regime to a bubble regime.

JEL-codes: J64 O41 O42 (search for similar items in EconPapers)
Date: 2016
References: Add references at CitEc
Citations: View citations in EconPapers (12)

Downloads: (external link)
http://hdl.handle.net/10.1093/oep/gpw032 (application/pdf)
Access to full text is restricted to subscribers.

Related works:
Working Paper: Bubbles and unemployment in an endogenous growth model (2014)
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:oup:oxecpp:v:68:y:2016:i:4:p:1084-1106.

Ordering information: This journal article can be ordered from
https://academic.oup.com/journals

Access Statistics for this article

Oxford Economic Papers is currently edited by James Forder and Francis J. Teal

More articles in Oxford Economic Papers from Oxford University Press Oxford University Press, Great Clarendon Street, Oxford OX2 6DP, UK.
Bibliographic data for series maintained by Oxford University Press ().