The Macroeconomic Consequences of Asset Bubbles and Crashes

Lisi Shi and Richard M. H. Suen

MPRA Paper from University Library of Munich, Germany

Abstract: This paper examines the macroeconomic effects of asset price bubbles and crashes in an overlapping generations economy. The model highlights the effects of asset price fluctuations on labor supply decisions, and demonstrates how labor market adjustment can help propagate the effects of these fluctuations to the aggregate economy. It is shown that, under certain conditions, asset bubbles can crowd in productive investment and lead to an expansion in total employment, and the bursting of these bubbles can have an immediate negative impact on these variables.

Keywords: Asset Bubbles; Overlapping Generations; Endogenous Labor (search for similar items in EconPapers)
JEL-codes: E22 E44 (search for similar items in EconPapers)
Date: 2014-06
New Economics Papers: this item is included in nep-dge and nep-mac
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https://mpra.ub.uni-muenchen.de/57045/1/MPRA_paper_57045.pdf original version (application/pdf)
https://mpra.ub.uni-muenchen.de/86497/1/MPRA_paper_57045.pdf revised version (application/pdf)
https://mpra.ub.uni-muenchen.de/86498/1/MPRA_paper_86498.pdf revised version (application/pdf)

Related works:
Working Paper: The Macroeconomic Consequences of Asset Bubbles and Crashes (2014)
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:57045

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