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Asset Bubbles and Bailouts

Tomohiro Hirano (), Masaru Inaba and Noriyuki Yanagawa

No 15-004E, CIGS Working Paper Series from The Canon Institute for Global Studies

Abstract: As long as bubble size is relatively small, bubbles increase production level, but once the size becomes too large, then bubbles reduce it. Given this non-monotonic relationship, 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 a partial bailout policy achieves production efficiency. Moreover, it examines the welfare effects of bailout policies rigorously and shows that even non-risky bubbles may be undesirable for taxpayers.

New Economics Papers: this item is included in nep-fmk
Date: 2015-10
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https://www.canon-igs.org/workingpapers/151125_inaba.pdf (application/pdf)

Related works:
Journal Article: Asset bubbles and bailouts (2015) Downloads
Working Paper: Asset Bubbles and Bailouts (2015) Downloads
Working Paper: Asset Bubbles and Bailouts (2014) Downloads
Working Paper: Asset Bubbles and Bailouts (2012) Downloads
Working Paper: Asset Bubbles and Bailout (2012) Downloads
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