Understanding Bubbly Episodes

Vasco Carvalho, Jaume Ventura and Alberto Martin

No 605, Working Papers from Barcelona School of Economics

Abstract: Over the last two decades US aggregate wealth has fluctuated substantially. Against the backdrop of the Great Recession, the effects of these boom-and-bust cycles have come to dominate academic and policy discussions. How can we explain these fluctuations in wealth? Why are these fluctuations associated with changes in consumption, investment and output? In this note, we argue that answers to these questions entail the addition of two ingredients to existent macroeconomic models: rational bubbles and financial frictions. We explain why each of these building blocks is crucial to understand recent events and how they can be seamlessly integrated in standard models.

Keywords: Bubbles; economic growth; dynamic inefficiency; financial frictions; pyramid schemes (search for similar items in EconPapers)
JEL-codes: E32 E44 O40 (search for similar items in EconPapers)
Date: 2015-09
New Economics Papers: this item is included in nep-fdg and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (24)

Downloads: (external link)
https://bw.bse.eu/wp-content/uploads/2015/09/605-file.pdf (application/pdf)

Related works:
Journal Article: Understanding Bubbly Episodes (2012)
Working Paper: Understanding Bubbly Episodes (2012)
Working Paper: Understanding bubbly episodes (2012)
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:bge:wpaper:605

Access Statistics for this paper

More papers in Working Papers from Barcelona School of Economics Contact information at EDIRC.
Bibliographic data for series maintained by Bruno Guallar ().