Asset Price Bubbles in the Kiyotaki-Moore Model
Tomohiro Hirano and
MPRA Paper from University Library of Munich, Germany
We examine the effect of asset price bubbles in the Kiyotaki-Moore model. We show that the dynamic interactions between bubble-asset price, land price, and output generate powerful bubbly dynamics. The boom-bust cycles in bubble-asset price cause boom-crash cycles in the land market simultaneously, like a contagion by affecting the fundamentals of land. We also numerically analyze the welfare effects of bubbles in transitional dynamics.
Keywords: Bubbly Dynamics; Contagion; Welfare Effects of Bubbles (search for similar items in EconPapers)
JEL-codes: E44 (search for similar items in EconPapers)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:36632
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