Bubbly Liquidity

Emmanuel Farhi and Jean Tirole
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Jean Tirole: TSE-R - Toulouse School of Economics - UT Capitole - Université Toulouse Capitole - Comue de Toulouse - Communauté d'universités et établissements de Toulouse - EHESS - École des hautes études en sciences sociales - CNRS - Centre National de la Recherche Scientifique - INRAE - Institut National de Recherche pour l’Agriculture, l’Alimentation et l’Environnement

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Abstract: This paper analyzes the possibility and the consequences of rational bubbles in a dynamic economy where financially constrained firms demand and supply liquidity. Bubbles are more likely to emerge, the scarcer the supply of outside liquidity and the more limited the pledgeability of corporate income; they crowd investment in (out) when liquidity is abundant (scarce). We analyze extensions with firm heterogeneity and stochastic bubbles.

Keywords: Liquidity; Bubbles (search for similar items in EconPapers)
Date: 2011-11-18
Note: View the original document on HAL open archive server: https://hal.science/hal-05374344v1
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Published in Review of Economic Studies, 2011, 79 (2), pp.678-706. ⟨10.1093/restud/rdr039⟩

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Related works:
Journal Article: Bubbly Liquidity (2012)
Working Paper: Bubbly Liquidity (2011)
Working Paper: Bubbly Liquidity (2011)
Working Paper: Bubbly Liquidity (2011)
Working Paper: Bubbly Liquidity (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-05374344

DOI: 10.1093/restud/rdr039

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