Creating and Stabilizing an Enormous Bubble Economy Similar to the Great Depression

Guangming Huang ()

MPRA Paper from University Library of Munich, Germany

Abstract: First, with volatile income adjustment and the E-V rule of Markowitz (1952), a bond is embedded into the RBC economy under symmetric information conditions. Second, equipped with this way of involving credit, commercial bank and central bank are embedded into the flexible price economy with the monetary effectiveness of Huang (2021). Based on this monetary economy with banks, an enormous asset price bubble economy similar to the Great Depression was created and stabilized. Credit is a Pareto improvement to the original economies. The resource allocation in the unique equilibrium of the multiagent economy with taxes, money, and credit in this paper is Pareto optimal.

Keywords: Credit; Bond; Equity Premium; Financial Intermediary; Commercial bank; Central Bank Regime; Asset Price Volatility Puzzle; the Great Depression; Monetary Policy; Seigniorage; Neoclassical Monetary Economics; Multi-agent Macroeconomics; Pareto Optimality (search for similar items in EconPapers)
JEL-codes: E32 E58 G01 (search for similar items in EconPapers)
Date: 2025-03-08
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