Sectoral Bubbles and Endogenous Growth
Pengfei Wang () and
Jianjun Miao ()
No 227, 2012 Meeting Papers from Society for Economic Dynamics
Stock price bubbles are often on productive assets and occur in a sector of the economy. In addition, their occurence is often accompanied by credit booms. Incorporating these features, we provide a two-sector endogenous growth model with credit-driven stock price bubbles. Bubbles have a credit easing effect in that they relax collateral constraints and improve investment efficiency. Sectoral bubbles also have a capital reallocation effect in the sense that bubbles in a sector attract more capital to be reallocated to that sector. Their impact on economic growth depends on the interplay between these two effects.
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Working Paper: Sectoral Bubbles and Endogenous Growth (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:red:sed012:227
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