Are the Liquidity and Collateral Roles of Asset Bubbles Different?

Lise Clain‐chamosset‐yvrard, Xavier Raurich and Thomas Seegmuller

Journal of Money, Credit and Banking, 2023, vol. 55, issue 6, 1443-1473

Abstract: Several papers explain why asset bubbles are observed when growth is large. These papers differ in the role of the bubble, used to provide liquidities or as collateral in a borrowing constraint. We compare the liquidity and collateral roles of bubbles in an overlapping generations model. When the bubble is deterministic, the equilibrium is identical under these two roles, implying that the same mechanism explains the crowding‐in effect of the bubble on growth. With stochastic bubbles, growth is larger when bubbles play the liquidity role, because the burst of a bubble used for liquidity is less damaging to capital investors.

Date: 2023
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Citations: View citations in EconPapers (4)

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https://doi.org/10.1111/jmcb.13007

Related works:
Working Paper: Are the Liquidity and Collateral Roles of Asset Bubbles Different? (2023)
Working Paper: Are the liquidity and collateral roles of asset bubbles different? (2023)
Working Paper: Are the liquidity and collateral roles of asset bubbles different? (2020)
Working Paper: Are the liquidity and collateral roles of asset bubbles different? (2020)
Working Paper: Are the liquidity and collateral roles of asset bubbles different? (2020)
Working Paper: Are the liquidity and collateral roles of asset bubbles different? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:wly:jmoncb:v:55:y:2023:i:6:p:1443-1473

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