Bubbles and capital flows

Jaume Ventura

No 102, 2004 Meeting Papers from Society for Economic Dynamics

Abstract: This paper presents a stylized model of international trade and asset price bubbles. Its central insight is that bubbles tend to appear and expand in countries where productivity is low relative to the rest of the world. These bubbles absorb local savings, eliminating inefficient investments and liberating resources that are in part used to invest in high productivity countries. Through this channel, bubbles act as a substitute for international capital flows, improving the international allocation of investment and reducing rate-of-return differentials across countries. This view of asset price bubbles has important implications for the way we think about economic growth and fluctuations. It also provides a simple account of some real world phenomenae that have been difficult to model before, such as the recurrence and depth of financial crises or their puzzling tendency to propagate across countries

Keywords: Asset price bubbles; international capital flows; propagation of shocks; contagion (search for similar items in EconPapers)
JEL-codes: F21 F36 F43 (search for similar items in EconPapers)
Date: 2004
New Economics Papers: this item is included in nep-ifn
References: Add references at CitEc
Citations: View citations in EconPapers (11)

Downloads: (external link)
http://www.econ.upf.es/crei/people/jventura/bcfs2.pdf main text (application/pdf)
Our link check indicates that this URL is bad, the error code is: 500 Can't connect to www.econ.upf.es:80 (No such host is known. )

Related works:
Working Paper: Bubbles and Capital Flows (2002)
Working Paper: Bubbles and Capital Flows (2002)
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:red:sed004:102

Access Statistics for this paper

More papers in 2004 Meeting Papers from Society for Economic Dynamics Society for Economic Dynamics Marina Azzimonti Department of Economics Stonybrook University 10 Nicolls Road Stonybrook NY 11790 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christian Zimmermann ().