Leverage, Endogenous Unbalanced Growth, and Asset Price Bubbles

Tomohiro Hirano, Ryo Jinnai () and Alexis Akira Toda

Papers from arXiv.org

Abstract: We present a general equilibrium macro-finance model with a positive feedback loop between capital investment and land price. As leverage is relaxed beyond a critical value, through the financial accelerator, a phase transition occurs from balanced growth where land prices reflect fundamentals (present value of rents) to unbalanced growth where land prices grow faster than rents, generating land price bubbles. Unbalanced growth dynamics and bubbles are associated with financial loosening and technological progress. In an analytically tractable two-sector large open economy model with unique equilibria, financial loosening simultaneously leads to low interest rates, asset overvaluation, and top-end wealth concentration.

Date: 2022-11, Revised 2024-02
New Economics Papers: this item is included in nep-fdg and nep-gro
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://arxiv.org/pdf/2211.13100 Latest version (application/pdf)

Related works:
Working Paper: Leverage, Endogenous Unbalanced Growth, and Asset Price Bubbles (2023)
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:arx:papers:2211.13100

Access Statistics for this paper

More papers in Papers from arXiv.org
Bibliographic data for series maintained by arXiv administrators ().