EconPapers    
Economics at your fingertips  
 

Asset Bubbles, Unemployment, and a Financial Crisis

Takuma Kunieda (), Ken-ichi Hashimoto and Ryonghun Im ()
Additional contact information
Ryonghun Im: Graduate School of Economics, Kobe University

No 156, Discussion Paper Series from School of Economics, Kwansei Gakuin University

Abstract: A tractable model with asset bubbles is presented to demonstrate that a financial crisis caused by a bubble bursting increases unemployment rates. A bubbly asset has a positive market value because purchasing the asset is the sole saving method for agents who draw insufficient productivity, whereas selling the asset is a fund-raising method to initiate an investment project. The presence of bubbles corrects allocative inefficiency, relocating investment resources from low-productivity agents to high-productivity agents. Accordingly, the presence of bubbles can promote capital accumulation and reduce unemployment rates. However, a self-fulfilling financial crisis would result in high unemployment rates.

Keywords: Overlapping generations; Labor market friction; Borrowing constraints; Asset bubbles; Unemployment (search for similar items in EconPapers)
JEL-codes: J64 O41 O42 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-dge and nep-lab
Date: 2017-02, Revised 2017-02
References: View references in EconPapers View complete reference list from CitEc
Citations: Track citations by RSS feed

Downloads: (external link)
http://192.218.163.163/RePEc/pdf/kgdp156.pdf First version, 2017 (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:kgu:wpaper:156

Access Statistics for this paper

More papers in Discussion Paper Series from School of Economics, Kwansei Gakuin University Contact information at EDIRC.
Bibliographic data for series maintained by Toshihiro Okada ().

 
Page updated 2019-04-14
Handle: RePEc:kgu:wpaper:156