Sectoral Bubbles and Endogenous Growth
Jianjun Miao () and
Pengfei Wang ()
No WP2011-032, Boston University - Department of Economics - Working Papers Series from Boston University - Department of Economics
Stock price bubbles are often on productive assets and occur in a sector of the economy. In addition, their occurence is often accompanied with credit booms. Incorporating these features, we provide a two-sector endogenous growth model with credit-driven stock price bubbles. Bubbles have a credit easing effect by relaxing collateral constraints and improving investment efficiency. Sectoral bubbles also have a capital reallocation effect in the sense that bubbles in a sector attract more capital to be allocated to that sector. Their impact on economic growth depends on the interplay between these two effects.
Keywords: Bubbles; Collateral Constraints; Externality; Economic Growth; Capital Reallocation; Multiple Equilibria (search for similar items in EconPapers)
JEL-codes: D92 E22 E44 G1 (search for similar items in EconPapers)
Pages: 53 pages
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Working Paper: Sectoral Bubbles and Endogenous Growth (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:bos:wpaper:wp2011-032
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