Economics at your fingertips  

Recurrent Bubbles and Economic Growth

Pablo A. Guerron-Quintana, Tomohiro Hirano and Ryo Jinnai ()

No 20-005E, CIGS Working Paper Series from The Canon Institute for Global Studies

Abstract: We study a regime-switching recurrent bubble model with endogenous growth. The economy experiences both bubbly and bubbleless regimes recurrently. Innitely lived households expect future bubbles, which crowds out investment and reduces economic growth. Because realized bubbles crowd in investment, their overall impact on economic growth and welfare crucially depends on both the level of nancial development and the frequency of bubbles. We examine the U.S. economic data through the lens of our model, nding evidence of recurrent bubbles. Furthermore, counterfactual simulations suggest that 1) the IT and housing bubbles together lifted U.S. GDP by almost 2 percentage points permanently; and 2) the U.S. economy could have grown even faster if people had believed that asset bubbles would not arise.

Pages: 55
Date: 2020-05
New Economics Papers: this item is included in nep-fdg, nep-gro and nep-mac
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link) (application/pdf)

Related works:
Working Paper: Recurrent Bubbles and Economic Growth (2019) Downloads
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:

Access Statistics for this paper

More papers in CIGS Working Paper Series from The Canon Institute for Global Studies Contact information at EDIRC.
Bibliographic data for series maintained by The Canon Institute for Global Studies ().

Page updated 2020-09-14
Handle: RePEc:cnn:wpaper:20-005e