Bubbles slowing down economic growth

Philippe Michel

No 1992001, LIDAM Discussion Papers CORE from Université catholique de Louvain, Center for Operations Research and Econometrics (CORE)

Abstract: To analyze the effects of bubbles on economic growth, we study a three-period life overlapping generations economy with accumulation of physical and human capital, using an extension of Azariadis and Drazen (1990). We characterize the balanced growth paths and the local dynamics both in the model without bubbles and with bubbles. Tirole (1985)'s study of bubbles is extended to the overlapping generations model with endogenous growth, and we show that bubbles are likely to have a negative effect on the growth rate of the economy.

Date: 1992-01-01
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Working Paper: Bubbles Slowing Down Economic Growth (1992)
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