Growth-Enhancing Bubbles

Jacques Olivier ()
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Jacques Olivier: GREGH - Groupement de Recherche et d'Etudes en Gestion à HEC - HEC Paris - Ecole des Hautes Etudes Commerciales - CNRS - Centre National de la Recherche Scientifique

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Abstract: This article challenges the conventional wisdom that speculation in financial markets reduces long-run growth. It shows that the real impact of a (rational deterministic) speculative bubble depends on the type of asset that is being speculated on. Speculative bubbles on equity raise the market value of firms, thus encouraging entrepreneurship, firm creation, investment, and growth. On the other hand, speculation on other types of assets is shown to be unambiguously growth-impairing. The model can explain some stylized facts about financial development and growth. Finally, regulatory implications are discussed briefly.

Keywords: Growth; Growth-Enhancing; Bubbles; Growth-Enhancing Bubbles (search for similar items in EconPapers)
Date: 2000-02-01
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Citations: View citations in EconPapers (50)

Published in International Economic Review, 2000, Vol.41,n°1, pp.133-152. ⟨10.1111/1468-2354.00058⟩

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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00460097

DOI: 10.1111/1468-2354.00058

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