Are the Liquidity and Collateral Roles of Asset Bubbles Different?

Lise Clain‐chamosset‐yvrard (), Xavier Raurich and Thomas Seegmuller ()
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Lise Clain‐chamosset‐yvrard: GATE Lyon Saint-Étienne - Groupe d'Analyse et de Théorie Economique Lyon - Saint-Etienne - UL2 - Université Lumière - Lyon 2 - UJM - Université Jean Monnet - Saint-Étienne - EM - EMLyon Business School - CNRS - Centre National de la Recherche Scientifique
Thomas Seegmuller: AMSE - Aix-Marseille Sciences Economiques - EHESS - École des hautes études en sciences sociales - AMU - Aix Marseille Université - ECM - École Centrale de Marseille - CNRS - Centre National de la Recherche Scientifique

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Abstract: Several papers explain why asset bubbles are observed when growth is large. These papers differ in the role of the bubble, used to provide liquidities or as collateral in a borrowing constraint. We compare the liquidity and collateral roles of bubbles in an overlapping generations model. When the bubble is deterministic, the equilibrium is identical under these two roles, implying that the same mechanism explains the crowding-in effect of the bubble on growth. With stochastic bubbles, growth is larger when bubbles play the liquidity role, because the burst of a bubble used for liquidity is less damaging to capital investors.

Keywords: bubble; liquidity; collateral; crowding-in effect; growth (search for similar items in EconPapers)
Date: 2023-03-23
New Economics Papers: this item is included in nep-des and nep-dge
Note: View the original document on HAL open archive server: https://amu.hal.science/hal-04069774v1
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Citations: View citations in EconPapers (4)

Published in Journal of Money, Credit and Banking, In press, ⟨10.1111/jmcb.13007⟩

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Related works:
Journal Article: Are the Liquidity and Collateral Roles of Asset Bubbles Different? (2023)
Working Paper: Are the liquidity and collateral roles of asset bubbles different? (2023)
Working Paper: Are the liquidity and collateral roles of asset bubbles different? (2020)
Working Paper: Are the liquidity and collateral roles of asset bubbles different? (2020)
Working Paper: Are the liquidity and collateral roles of asset bubbles different? (2020)
Working Paper: Are the liquidity and collateral roles of asset bubbles different? (2020)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-04069774

DOI: 10.1111/jmcb.13007

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