Asset Bubbles and Bailouts

Tomohiro Hirano, Masaru Inaba and Noriyuki Yanagawa
Additional contact information
Noriyuki Yanagawa: University of Tokyo

No CARF-F-268, CARF F-Series from Center for Advanced Research in Finance, Faculty of Economics, The University of Tokyo

Abstract: This paper investigates the relationship between bubbles and government bailouts. It shows that bailouts for bursting bubbles may positively influence ex-ante production efficiency and relax the existence condition of stochastic bubbles. The level of bailouts has a non-monotonic relationship with production efficiency and not full bailouts but a "partial bailout" policy realizes production efficiency. Moreover, it examines the welfare effects of bailout policies rigorously. The welfare of rescued entrepreneurs is an increasing function of bailout level, but the welfare of taxpayers (workers) shows a non-monotonic relation with bailout level. It shows that even non-risky bubbles may be undesirable for taxpayers.

Pages: 75 pages
Date: 2012-01
New Economics Papers: this item is included in nep-ppm
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Citations: View citations in EconPapers (1)

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https://www.carf.e.u-tokyo.ac.jp/old/pdf/workingpaper/fseries/F268.pdf (application/pdf)

Related works:
Journal Article: Asset bubbles and bailouts (2015)
Working Paper: Asset Bubbles and Bailouts (2015)
Working Paper: Asset Bubbles and Bailouts (2015)
Working Paper: Asset Bubbles and Bailouts (2014)
Working Paper: Asset Bubbles and Bailout (2012)
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Persistent link: https://EconPapers.repec.org/RePEc:cfi:fseres:cf268

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