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Asset Bubbles and Global Imbalances

Daisuke Ikeda and Toan Phan ()

No 18-7, Working Paper from Federal Reserve Bank of Richmond

Abstract: We analyze the relationships between bubbles, capital flows, and economic activities in a rational bubble model with two large open economies. We establish a reinforcing relationship between global imbalances and bubbles. Capital flows from South to North facilitate the emergence and the size of bubbles in the North. Bubbles in the North in turn facilitate South-to-North capital flows. The model can simultaneously explain several stylized features of recent bubble episodes.

Keywords: financial frictions; global imbalances; credit boom; Rational bubbles (search for similar items in EconPapers)
JEL-codes: F32 F44 F41 (search for similar items in EconPapers)
Pages: 46 pages
Date: 2018-03-23, Revised 2018-03-23
New Economics Papers: this item is included in nep-fdg, nep-ifn and nep-opm
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Journal Article: Asset Bubbles and Global Imbalances (2020) Downloads
Journal Article: Asset Bubbles and Global Imbalances (2019) Downloads
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