Bubbles and Asset Supply

Bulles spéculatives et offre d'actifs

François Geerolf ()
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François Geerolf: ECON - Département d'économie (Sciences Po) - Sciences Po - Sciences Po - CNRS - Centre National de la Recherche Scientifique

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Abstract: This dissertation is composed of five chapters, all of which are united by the idea that capital is not scarce any more in our economies, and that the resulting low interest rates environment can open up the possibility for the emergence of rational speculative bubbles. The first chapter of the thesis uses national accounts and balance sheets data to show that capital income coming from investment is much lower than was previously thought, always lower than investment in Japan, which points to the idea of excess savings. In the second chapter of this thesis, I show that leverage and short-sales constraints are crucial in understanding the formation and the location of rational speculative bubbles. It generates procyclical leverage without the assumption of ''scary bad news'', return predictability, and equilibrium default. It helps us think about the effect of margin requirements, financial deregulation, and that of central bank's actions on asset prices. In chapter 3, I show that rational speculative bubbles can drive the business cycle, inducing positive comovement between consumption, hours worked, investment and production, thus being an alternative to productivity shocks to drive macroeconomic fluctuations. The results in chapter 4 suggest that asset overvaluations could drive international business cycles as well, inducing current account deficits. Finally, the chapter 5 is a first step towards thinking about capital taxation in a world with very abundant savings: on the one hand, capital taxation crowds out capital accumulation by discouraging savings, but on the other hand it reduces asset supply and thus helps free resources for investment.

Keywords: Low interest rates; Capital taxation; Asset overvaluation; Current account imbalances; International business cycles; Business cycles; Financial frictions; Short-sale constraints; Leverage constraints; Excess savings; Rational speculative bubbles; Capital abundance; Cycles économiques; Excès d’épargne; Abondance du capital; Taux d’intérêt bas; Contraintes de levier; Contraintes de vente à découvert; Frictions financières; Cycles internationaux; Déséquilibres courants; Surévaluation des actifs; Fiscalité du capital; Bulles spéculatives rationnelles (search for similar items in EconPapers)
Date: 2013-07-02
Note: View the original document on HAL open archive server: https://sciencespo.hal.science/tel-05506457v1
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Published in Economics and Finance. Sciences Po - Institut d'études politiques de Paris, 2013. English. ⟨NNT : 2013IEPP0029⟩

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